Household Employment Taxes 2016 Checklist
Schedule H 2016 reports federal employment taxes for household workers such as nannies, housekeepers, and caregivers. This form becomes required only if cash wages paid to one household employee reached $2,000 or more during 2016, or if total cash wages to all household employees reached $1,000 or more in any calendar quarter of 2015 or 2016.
No year-specific programs apply to Schedule H 2016 that alter core filing obligations or calculation methods. Stimulus reconciliation, ACA shared responsibility, TCJA provisions, and unemployment exclusion do not apply to this form and year.
Understanding Filing Requirements
You must file Schedule H if you paid any one household employee cash wages of $2,000 or more in 2016. The $2,000 test applies to each employee separately.
Cash wages include payments by check, money order, or similar methods but exclude the value of food, lodging, clothing, and other noncash items. Transportation benefits may be excluded from cash wages, including transit passes up to $255 per month and qualified parking up to
$255 per month for 2016.
Employee Information and Documentation
Each household employee’s name, Social Security number, and address must match the documentation provided. The worker qualifies as your household employee if you control what work is done and how it is done, regardless of whether employment is full-time or part-time.
You must verify that the employee can legally work in the United States by completing USCIS
Form I-9 with the employee. Examine required identity and work eligibility documents as listed on Form I-9.
Keep the completed form in your own records rather than submitting it to any government entity.
The form must remain available for review upon notice by authorized U.S. government officials.
Federal Income Tax Withholding
Federal income tax withholding is not required for household employees. You should withhold federal income tax only if your household employee requests withholding and you agree to it.
The employee must provide you with a completed Form W-4 when withholding is agreed upon.
No default withholding obligation exists if the employee does not request it or fails to provide
Form W-4.
Social Security and Medicare Taxes
Social Security and Medicare taxes apply to household employee wages when you pay $2,000 or more in cash wages during 2016 to any one employee. The Social Security tax rate is 6.2 percent each for employee and employer, with a wage base limit of $118,500 for 2016.
Medicare tax is 1.45 percent each for employee and employer, with no wage base limit. You must withhold Additional Medicare Tax at 0.9 percent from wages exceeding $200,000 paid to any one employee during the calendar year.
Calculate these taxes on all cash wages paid in 2016 to each employee who meets the $2,000 test, regardless of when wages were earned. The Additional Medicare Tax applies only to the employee, with no employer share of this tax.
The following wages do not count toward Social Security or Medicare taxes
- Payments made to your spouse for household services are excluded from Social
Security and Medicare taxes.
- Household services performed by your child under age 21 do not generate Social
Security or Medicare tax liability on the wages you pay.
- In most cases, payments to your parent are excluded from Social Security and Medicare
taxes, unless your child is under age 18 or a child with a disability lives with you and the parent provides qualifying care.
- Services performed by employees who are under age 18 at any time during 2016 are
generally exempt from Social Security and Medicare taxes, unless household work is their principal occupation.
Federal Unemployment Tax
Federal Unemployment Tax applies if you pay total cash wages of $1,000 or more in any calendar quarter of 2015 or 2016 to household employees. A calendar quarter means January through March, April through June, July through September, or October through December.
The FUTA tax is 6.0 percent of the first $7,000 of cash wages paid to each household employee during 2016. You may take a credit of up to 5.4 percent against the FUTA tax, resulting in a net tax rate of 0.6 percent, if you pay all required state unemployment contributions by April 18,
2017.
FUTA tax cannot be deducted from employee wages; it must be paid out of your own pocket.
Contact your state unemployment tax agency to determine whether you need to pay state unemployment contributions or carry workers’ compensation insurance.
Employer Identification Number
To file Schedule H, you will need an Employer Identification Number if you have domestic workers. You cannot use your Social Security number in place of an EIN for this purpose. Apply for an EIN immediately over the internet, in four business days by fax, or in about four weeks by mail using Form SS-4. Do not file Schedule H without obtaining an EIN first.
Schedule H Structure and Completion
Schedule H 2016 consists of three main parts. Part I covers Social Security, Medicare, and federal income taxes with lines 1 through 9.
Part II addresses the Federal Unemployment Tax with two sections for different reporting scenarios. Part III totals all household employment taxes by adding amounts from Part I and
Part II.
Part I: Social Security, Medicare, and Federal Income Taxes
- Enter the total cash wages subject to Social Security tax on line 1, then use line 2 to
calculate the Social Security tax at 12.4 percent.
- Report the total cash wages subject to Medicare tax on line 3 and calculate the Medicare
tax at 2.9 percent on line 4.
- Use line 5 to report wages exceeding $200,000 and calculate the Additional Medicare
Tax at 0.9 percent on line 6.
- Enter any federal income tax withheld on line 7 and total all Part I taxes on line 8.
Part II: Federal Unemployment Tax
Section A applies if you paid contributions to only one state, paid all contributions by the filing due date, and all FUTA-taxable wages were also taxable for state unemployment. Section B requires more detailed reporting if you answer no to any of those questions. Complete the section that applies to your situation based on your answers to lines 10 through 12.
Part III: Total Household Employment Taxes
Line 25 enters the amount from line 8 or zero if you checked the yes box on line C of page 1.
Line 26 adds the amounts from lines 16, 24, and 25. Line 27 determines whether you file
Schedule H with Form 1040 or file Schedule H by itself. Part III does not involve any exemption from withholding claims or nanny tax summary reporting.
Form W-2 and Form W-3 Requirements
You must file Form W-2 for each household employee to whom you paid $2,000 or more of cash wages in 2016 that are subject to Social Security and Medicare taxes. Additionally, regardless of the amount, you must file Form W-2 if you withheld federal income tax from the wages of any household employees.
Provide Copies B, C, and 2 of Form W-2 to each employee by January 31, 2017. Send Copy A of all Forms W-2 with Form W-3 to the Social Security Administration by January 31, 2017. If you file one or more Forms W-2, you must also file Form W-3 when filing on paper.
Filing and Payment
Attach Schedule H to your Form 1040, 1040NR, 1040-SS, or 1041 and file it by April 18, 2017. If you are not required to file a federal income tax return, you must file Schedule H by itself by
April 18, 2017, with payment for the total household employment taxes due.
Make your check or money order payable to the United States Treasury for the total household employment taxes due. Enter your name, address, Social Security number, daytime phone number, and “2016 Schedule H” on your check or money order.
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