Household Employment Taxes 2013 Checklist
Schedule H 2013 calculates and reports Social Security, Medicare, and federal income tax withholding for household employees when wages exceed annual thresholds. Household employers must understand these requirements to comply with federal tax obligations and avoid penalties.
Understanding Household Employee Status
You have a household employee when you hire someone to perform household work, and you control what work is done and how it is done. The IRS applies common law rules to determine employee status based on your right to direct the manner and method of work performance.
Household work includes services performed in or around your home by babysitters, nannies, housekeepers, caretakers, health aides, drivers, and yard workers. Your control over work methods distinguishes employees from independent contractors who operate their own businesses and determine their own work processes.
Filing Requirements and Wage Thresholds
Schedule H filing becomes mandatory when total cash wages paid to all household employees during 2013 meet or exceed specific thresholds. You must file Schedule H if you paid any one household employee cash wages of $1,800 or more in 2013 for Social Security and Medicare taxes.
Federal unemployment tax obligations arise when you pay total cash wages of $1,000 or more in any calendar quarter of 2012 or 2013 to household employees. Cash wages include payments made by check, money order, or other monetary forms, but they exclude noncash items such as food, lodging, clothing, and transit passes.
Tax Rates and Calculations for 2013
Social Security tax applies at 6.2 percent for both employee and employer shares on wages up to $113,700 per employee during 2013. Medicare tax applies at 1.45 percent for both employee and employer shares on all cash wages without wage base limits.
You calculate combined Social Security and Medicare taxes at 15.3 percent of covered wages, splitting responsibility equally between employer and employee. Federal unemployment tax applies at an effective rate of 0.6 percent on the first $7,000 of annual wages per employee after accounting for state unemployment tax credits.
Employer Identification Number Requirements
You must obtain an Employer Identification Number before filing Schedule H because Social
Security numbers cannot substitute for this requirement. Apply for an EIN using Form SS-4 through online application, telephone, fax, or mail, depending on your preference and timeline needs.
The IRS provides immediate EIN assignment through online and telephone channels, while fax applications are processed within four business days, and mail applications require approximately four weeks. Your EIN serves as your permanent federal tax identification for all household employment tax reporting and appears on Schedule H and Forms W-2.
Employee Documentation and Verification
You and each household employee must complete USCIS Form I-9 to verify employment eligibility and work authorization status in the United States. Complete the employer section of
Form I-9 by examining documents that establish both identity and employment authorization on or before the first day of work.
Keep completed Form I-9 in your records for inspection by authorized government officials, but do not submit it to the IRS, Social Security Administration, or other agencies. Verify that workers can legally perform services in the United States before establishing the employment relationship.
Wage Exclusions and Special Rules
Certain wages do not count toward Social Security and Medicare tax thresholds even when
payments exceed annual limits
- Wages that you pay to your spouse for household services are excluded from Social
Security and Medicare tax calculations.
- Payments made to your child who is under age 21 for household services do not count
toward household employment tax requirements.
- Wages paid to your parent are generally excluded from household employment taxes
unless specific childcare-related conditions are met.
- Payments made to employees under age 18 are excluded from employment taxes
unless household services are their principal occupation.
Parents may qualify as household employees subject to Social Security and Medicare taxes when they provide childcare for your child under age 18 or with special needs, and you are divorced, widowed, or married to someone unable to provide care.
Federal Income Tax Withholding
Federal income tax withholding remains optional for household employers unless employees specifically request withholding. Employees who want federal income tax withheld must complete Form W-4 and submit it to you for processing.
You withhold federal income tax according to the tables and methods specified in IRS publications when you agree to honor employee withholding requests. Household employees who do not have federal income tax withheld must make estimated tax payments or increase withholding from other income sources to cover their tax obligations.
Form W-2 Filing Obligations
You must file Form W-2 for each household employee to whom you paid $1,800 or more in cash wages during 2013 that are subject to Social Security and Medicare taxes. Issue Form W-2 even when wages fall below the $1,800 threshold if you withheld federal income tax from any household employee wages.
Provide Copies B, C, and 2 of Form W-2 to each employee by January 31, 2014, and send
Copy A with Form W-3 to the Social Security Administration by February 28, 2014. File Forms
W-2 and W-3 electronically by March 31, 2014, if you choose electronic submission instead of paper filing.
Payment Methods and Due Dates
Most household employers attach Schedule H to Form 1040 and pay household employment taxes with their personal income tax return by April 15, 2014. You may increase federal income tax withholding from wages or pension payments to cover household employment taxes throughout the year instead of making estimated tax payments.
Make estimated tax payments using Form 1040-ES if you choose quarterly payment scheduling rather than annual payment with your tax return. File Schedule H by itself when you do not need to file a personal income tax return due to income below the filing thresholds.
Child and Dependent Care Credit Eligibility
You may claim the Child and Dependent Care Credit on Form 2441 for wages paid to household employees who provide childcare services. The credit applies separately from Schedule H reporting and allows you to claim qualifying expenses on your income tax return.
Employment tax obligations on Schedule H and credit eligibility on Form 2441 operate independently, so paying employment taxes does not preclude claiming available childcare credits. Calculate your credit based on qualifying expenses and your adjusted gross income according to Form 2441 instructions.
Record Retention Requirements
Keep copies of Schedule H, Forms W-2, W-3, and W-4 for at least four years after the due date for filing Schedule H or the date you paid the taxes. Record the dates and amounts of cash wage payments, Social Security tax withheld, Medicare tax withheld, and federal income tax withheld for each pay period.
Maintain records of each employee’s name, address, and Social Security number for reporting and verification purposes. Accurate records support tax return preparation and provide documentation if the IRS requests information about household employment taxes.
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