Household Employment Taxes 2018 Checklist
Schedule H applies to taxpayers who paid household employees and meet the cash wage test threshold for 2018. Unlike general business schedules, this form computes Social Security and
Medicare taxes for domestic workers and requires coordination with Form 1040.
Understanding the Cash Wage Test Threshold
You must file Schedule H if you paid any one household employee cash wages of $2,100 or more during 2018. This threshold triggers Social Security and Medicare tax obligations for wages paid to domestic workers such as nannies, housekeepers, health aides, and yard workers.
Cash wages include payments made by check, money order, or any other monetary form. The value of food, lodging, clothing, transit passes, and other noncash items you provide to household employees does not count as cash wages for Social Security and Medicare tax purposes.
Federal Unemployment Tax Requirements
Federal unemployment tax obligations arise separately if you paid total cash wages of $1,000 or more in any calendar quarter of 2017 or 2018 to household employees. FUTA applies to the first
$7,000 of wages paid to each household employee during 2018.
You pay FUTA tax from your own funds and do not withhold it from employee wages. The FUTA tax rate operates at 6.0% on the first $7,000 of cash wages paid to each qualifying employee.
Employer Identification Number Requirements
You need an Employer Identification Number to file Schedule H for 2018. The Internal Revenue
Service issues this nine-digit number, and you cannot substitute your Social Security number in its place.
Application methods for obtaining an EIN include
- Applying online at IRS.gov/EIN provides immediate issuance of an Employer
Identification Number upon completion of the application.
- Submitting Form SS-4 by fax generally results in receipt of an Employer Identification
Number within four business days.
- Submitting Form SS-4 by mail typically requires approximately four weeks for processing
and delivery of the Employer Identification Number.
Social Security and Medicare Tax Calculations
The 2018 Social Security tax rate stands at 6.2% each for employer and employee, with a wage base limit of $128,400. Medicare tax applies at 1.45% each for employer and employee, with no wage base limit on those wages.
You must withhold the employee’s share of these taxes from wages or choose to pay both shares from your own funds. When you pay both shares from your own funds, the taxes you pay to cover your employee’s share must be included in the employee’s wages for income tax purposes.
Additional Medicare Tax withholding becomes mandatory when you pay wages exceeding
$200,000 to any household employee during the calendar year. Wages paid over this threshold are subject to an additional 0.9% withholding tax, which is only applicable to the employee and does not require an employer share.
FUTA Tax Credits and Credit Reduction States
You may claim a credit of up to 5.4% against FUTA tax if you pay all required state unemployment contributions by the federal income tax return due date. This credit reduces your net FUTA tax rate to 0.6% when you meet all state payment deadlines and requirements.
Credit reduction states present an exception to this general rule. The U.S. Virgin Islands qualified as a credit reduction state for 2018, requiring household employers in that jurisdiction to calculate their FUTA credit using a reduced rate as specified in Schedule H instructions.
Filing Schedule H With Form 1040
Schedule H must accompany Form 1040, Form 1040NR, Form 1040-SS, or Form 1041 when you file your 2018 federal income tax return. You report the total household employment taxes from Schedule H, Part III, line 26 on Schedule 4 (Form 1040), line 60a.
Schedule H cannot be filed separately unless you do not have a filing requirement for a 2018 federal income tax return. Calendar year taxpayers having no household employees in 2018 do not need to complete Schedule H for the tax year.
Schedule H and Schedule SE Are Separate Forms
The household employment taxes you calculate on Schedule H do not transfer to Schedule SE.
Schedule SE reports self-employment tax on net profit or loss from business activities, which represents an entirely separate tax calculation.
Household employment taxes and self-employment taxes serve different purposes under the
Internal Revenue Code and require independent reporting on your return. Schedule H reports only employment taxes owed on wages paid to household employees, while Schedule SE calculates tax on your own business earnings.
Form W-2 and Form W-3 Filing Requirements
- A Form W-2 is required for each household employee who received $2,100 or more in
cash wages during 2018 that were subject to Social Security and Medicare taxes.
- Form W-2 is also required for any household employee from whose wages federal
income tax was withheld, regardless of the total wage amount paid during the year.
- Form W-3 must accompany Copy A of all Forms W-2 when wage reports are submitted
to the Social Security Administration.
- The deadline for providing Forms W-2 to employees and filing Forms W-2 and W-3 with
the Social Security Administration is January 31, 2019.
- Form W-2 should not be sent to the Social Security Administration when no federal
income tax was withheld, and the employee’s Social Security and Medicare wages did not exceed $2,100 for the year.
- Electronic filing through the Social Security Administration’s Form W-2 Online service
automatically generates the required Form W-3 information based on the submitted wage data.
State Employment Tax Obligations
Federal Schedule H filing does not eliminate state-level household employer obligations. You should contact your state unemployment tax agency to determine whether you need to pay state unemployment contributions for your household employees.
State employment tax requirements operate independently from federal household employment tax obligations. The U.S. Department of Labor maintains contact information for state unemployment tax agencies, and you should also determine if you need to pay or collect other state employment taxes or carry workers’ compensation insurance.
Child and Dependent Care Credit Eligibility
You can claim the child and dependent care credit on Form 2441 even when your care provider qualifies as your household employee. The household employment tax obligations you owe on
Schedule H operate independently from your eligibility to claim dependent care expenses on
Form 2441.
Form 2441 instructions include a caution noting that household employers may owe employment taxes, but this represents a reminder rather than a prohibition against claiming the credit. When your household employee also provides care services, you may need to fill out
Form 2441 for the dependent care credit and Schedule H for employment taxes.
Excluded Wages From Social Security and Medicare
Taxes
Certain wages you pay do not count as Social Security or Medicare wages even if the amounts exceed the $2,100 threshold. Wages paid to your spouse never count toward household employment tax calculations under any circumstances.
Additional excluded wages include
- When a child was under age 21 at any point during 2018, compensation provided for
household work does not count toward Social Security or Medicare tax calculations.
- Compensation provided to a parent is generally excluded from Social Security and
Medicare taxes, except in situations where child care–related exception rules apply.
- If a household worker was under age 18 at any time during 2018, the compensation is
excluded unless household services constituted the worker’s principal occupation.
The exception for parental wages applies when your parent cares for your child under age 18 or a child with a qualifying physical or mental condition, and you meet specific marital status requirements. These exceptions ensure that typical family arrangements do not trigger unnecessary employment tax obligations.
Required Records and Documentation
You must verify that your household employee can legally work in the United States before beginning employment. Both you and the employee must complete U.S. Citizenship and
Immigration Services Form I-9, Employment Eligibility Verification, no later than the first day of work.
Form I-9 must be kept in your own records for review upon notice by authorized government officials. Documentation requirements include examining identity and employment eligibility documents presented by the employee as specified on the Form I-9 instructions.
Complete Filing Requirements Summary
Your complete 2018 household employment tax return requires Schedule H attached to Form
1040 by April 15, 2019. Forms W-2 must be provided to employees and filed with the Social
Security Administration by January 31, 2019.
State filings must be completed according to your state’s specific requirements and deadlines.
Publication 926, Household Employer’s Tax Guide, provides detailed information on calculating, paying, and reporting household employment taxes for the 2018 tax year.
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