Schedule H 2010 Household Employment Tax Filing Guide

housekeepers, and caregivers when cash wages meet annual thresholds. The 2010 form reports Social Security and Medicare taxes, federal unemployment tax obligations, and withheld federal income tax separately from standard business employment tax returns.

Filing Requirements and Wage Thresholds

You must file Schedule H 2010 if you answer yes to any question on lines A, B, or C of the form.

Meeting any one of these three conditions triggers the Schedule H filing requirement for the

2010 tax year.

• Line A asks whether you paid any single household employee cash wages of $1,700 or

more during 2010. This threshold applies per employee for Social Security and Medicare tax purposes.

• Line B addresses federal income tax withholding for any household employee during the

year. You must file Schedule H if you withheld any amount of federal income tax from household employee wages.

• Line C examines whether you paid total cash wages of $1,000 or more in any calendar

quarter of 2009 or 2010 to all household employees combined. The $1,000 quarterly threshold determines federal unemployment tax liability and applies to combined wages during any three-month calendar quarter.

Cash wages include payments by check or money order but exclude the value of food, lodging, clothing, or other noncash items provided to household workers. Transportation benefits such as transit passes worth up to $230 per month do not count as cash wages for 2010.

Form Structure and Tax Calculation

Schedule H 2010 contains two parts that organize household employment tax calculations. Part

I addresses Social Security, Medicare, and federal income taxes on household employee wages, while Part II covers federal unemployment tax calculations and state unemployment tax reporting obligations.

Part I: Social Security, Medicare, and Federal Income Taxes

Part I requires you to enter total cash wages paid to each household employee who meets the

$1,700 test. You calculate Social Security tax by applying the 12.4 percent rate to wages up to the $106,800 wage base for 2010.

Medicare tax applies at 2.9 percent to all wages with no wage cap. The form separately reports both the employee portion and employer portion of these taxes, with each party paying 6.2 percent for Social Security and 1.45 percent for Medicare.

Part II: Federal Unemployment Tax

Part II calculates federal unemployment tax at 6.2 percent of wages, subject to a maximum

$7,000 wage base per employee. You may claim a credit of up to 5.4 percent for state unemployment contributions paid by the filing deadline, resulting in a net FUTA tax rate of 0.8 percent.

Credit reduction states require additional federal unemployment tax payments due to unpaid federal loans. For 2010, Indiana and South Carolina employers lose 0.3 percent of the regular

5.4 percent credit, while Michigan employers lose 0.6 percent of the credit.

Form W-2 Requirements for Household Employees

You must file Form W-2 for each household employee to whom you paid $1,700 or more of cash wages in 2010 that are subject to Social Security and Medicare taxes. Filing Form W-2 is also required if you withheld federal income tax from any household employee’s wages, regardless of the wage amount.

The Form W-2 deadline requires you to provide Copies B, C, and 2 to each employee by

January 31, 2011. Send Copy A of all Forms W-2 with Form W-3 to the Social Security

Administration by February 28, 2011, or March 31, 2011, if you file electronically.

Form W-3 serves as the transmittal document for all household employee wage statements. To designate the wages as household employment as opposed to business employment, you must check the box for the household employer on Form W-3.

Reporting Schedule H on Form 1040

Attach completed Schedule H directly to Form 1040 when you file your 2010 tax return. Enter the total household employment taxes from Schedule H, line 26, on Form 1040, line 59, and check box b to indicate household employment taxes.

The 2010 Form 1040 does not use Schedule 2 for household employment taxes because

Schedule 2 (Form 1040) was not introduced until the 2018 tax year redesign. All household employment tax amounts from Schedule H flow directly to line 59 of the main Form 1040.

Taxpayers not required to file Form 1040 for 2010 because their income falls below filing thresholds must file Schedule H as a standalone return by April 18, 2011. Complete Schedule H with all required information and mail it to the address listed for your state of residence, including payment for the full amount of household employment taxes due.

Documentation and Record Retention

Collect and maintain complete records for each household employee throughout the 2010 tax year. Required documentation supports tax calculations and provides evidence of compliance with federal employment tax laws.

Required employee information includes

• You must record the employee’s full legal name and complete mailing address to identify

the worker for tax reporting purposes properly.

• Each employee’s Social Security number or Individual Taxpayer Identification Number

must be documented to meet federal reporting requirements.

• Employers are required to maintain detailed records of all cash wage payments made

during 2010, including the specific dates and amounts paid.

Required payroll records for each payday include

• Payroll records must show the dates and amounts of all cash and noncash wage

payments made to the employee.

• Each payday record must reflect the employee’s Social Security tax withheld at the 6.2

percent rate.

• Payroll documentation must also include the employee’s Medicare tax withheld at the

1.45 percent rate.

• If federal income tax was withheld, the withheld amount must be clearly recorded for

each pay period.

• Records must also account for any advance earned income credit payments made to the

employee.

Keep copies of Schedule H, related Forms W-2 and W-3, and all supporting wage records for at least four years. The retention period begins after the due date for filing Schedule H or the date you paid the taxes, whichever occurs later.

State Unemployment Tax Obligations

Research the 2010 state unemployment tax requirements for household employers in your state of residence or where the employee performs work. Most states require household employers to register and pay state unemployment taxes when wages meet state-specific thresholds.

Contact your state unemployment tax agency to determine registration requirements, contribution rates, and filing deadlines. State requirements operate independently from federal

Schedule H obligations and may require separate quarterly or annual filings beyond the federal return.

Employer Identification Number

You need an Employer Identification Number to file Schedule H for household employees. Apply for an EIN using Form SS-4 if you do not already have one assigned.

The IRS provides immediate EIN issuance through the online application system, telephone application, or within four business days by fax. Do not use your Social Security number in place of an EIN when filing employment tax forms for household workers.

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