Schedule H 2014 Household Employment Tax Filing Guide

Medicare taxes on domestic worker wages from the primary income tax filing. The 2014 version enforces substantive wage reporting and matching to Form W-2 copies delivered to employees, requiring threshold-specific filing even when a primary return might otherwise be unnecessary.

Filing Requirements and Thresholds

You must file Schedule H if you paid any household employee cash wages of $1,900 or more during 2014. Cash wages include payments made by check or money order but exclude the value of food, lodging, clothing, or other noncash items you provide to household employees.

The $1,900 threshold applies to each employee separately, and you must report all cash wages once any single employee reaches this amount. Household work includes services performed in or around your home by workers such as babysitters, caretakers, cleaning people, drivers, health aides, housekeepers, nannies, private nurses, and yard workers.

Determining Employee Status

You have a household employee if you control what work the person does and how they perform it, regardless of whether you give them freedom of action. The right to control the details of how work is done determines employee status, not the actual exercise of that control.

Tax Rates and Wage Calculations

The Social Security tax rate for 2014 is 6.2 percent each for you and your employee, applied to wages up to $117,000. There is no wage cap on the Medicare tax rate, which is 1.45 percent for both you and your employee.

You must withhold Additional Medicare Tax at 0.9 percent from wages exceeding $200,000 paid to any single employee, though this additional tax applies only to the employee and has no employer share. Federal income tax withholding from household employee wages is not required unless your employee requests it and you agree to withhold.

Form W-2 and Form W-3 Requirements

Filing Obligations

You must file Form W-2 for each household employee to whom you paid $1,900 or more of cash wages subject to Social Security and Medicare taxes in 2014. You must also file Form W-2 for any employee from whom you withheld federal income tax, regardless of the wage amount.

Distribution Deadlines

• You must give copies B, C, and 2 of Form W-2 to each employee by February 2, 2015.
• You must send Copy A of all Forms W-2 with Form W-3 to the Social Security

Administration by March 2, 2015, or by March 31, 2015, if you file electronically.

• Employers do not attach Form W-2 copies to Schedule H or to their Form 1040 when

filing their tax returns.

Completing Schedule H

Schedule H consists of three main parts that calculate different components of household employment taxes. Part I, titled “Social Security, Medicare, and federal income taxes,” covers wage and tax calculations on lines 1 through 9 and does not contain fields for individual employee names, addresses, or Social Security numbers.

Part II addresses federal unemployment tax on lines 10 through 24, which you must complete only if you paid total cash wages of $1,000 or more in any calendar quarter of 2013 or 2014.

Part III totals all household employment taxes from lines 25 through 27 and determines where you report the final amount on your tax return.

Employer Identification Requirements

Enter your Social Security number and Employer Identification Number in the designated spaces at the top of Schedule H. You need an EIN to file Schedule H, and you cannot use your

Social Security number in place of an EIN.

An EIN can be obtained via the IRS website right away, by fax within four business days, or by mail application using Form SS-4 within four weeks. The EIN is a nine-digit number arranged in the following format: 00-0000000.

Transferring Schedule H to Form 1040

If you file Form 1040 for 2014, enter the total household employment taxes from Schedule H line 26 on Form 1040 line 60a. The 2014 Form 1040 includes a specific line labeled “Household employment taxes from Schedule H” for this purpose, and you must attach Schedule H to your

Form 1040, Form 1040NR, Form 1040-SS, or Form 1041 when you file by April 15, 2015.

You must file Schedule H on your own by April 15, 2015, if your income is below the filing thresholds and you are exempt from filing a 2014 tax return. Complete Schedule H and mail it with your payment to the address listed in the instructions for the place where you live.

Federal Unemployment Tax Obligations

The FUTA tax rate is 6.0 percent, but you may take a credit of up to 5.4 percent against this tax if you pay all required state unemployment contributions by April 15, 2015. This credit reduces the net FUTA tax rate to 0.6 percent for most employers who meet contribution deadlines.

You calculate FUTA tax on the first $7,000 of cash wages paid to each household employee during 2014, excluding wages paid to your spouse, your child under age 21, or your parent.

Certain states were designated as credit reduction states for 2014, which affects the amount of credit you can claim against your FUTA tax liability.

Credit Reduction States for 2014

If you paid wages subject to unemployment tax laws in the following states, you must complete

the credit reduction worksheet

• California (credit reduction rate: 0.012)
• Connecticut (credit reduction rate: 0.017)
• Indiana (credit reduction rate: 0.015)
• Kentucky (credit reduction rate: 0.012)

• New York (credit reduction rate: 0.012)
• North Carolina (credit reduction rate: 0.012)
• Ohio (credit reduction rate: 0.012)
• U.S. Virgin Islands (credit reduction rate: 0.012)

Third-Party Reporting and Employer Responsibility

Employers remain responsible for ensuring that tax returns are filed and payments are made, even if they contract with a third-party payroll service. The employer remains liable if the third party fails to perform any required action, and this responsibility cannot be transferred or eliminated through outsourcing.

If a government agency or authorized third-party agent reports and pays employment taxes on your behalf under specific IRS authorization using Form 2678, you do not need to file Schedule

H to report those taxes. This exception applies only when the IRS has formally approved an agent arrangement, not simply because you hired a payroll service.

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