Schedule H 2020 Household Employment Tax Rules

Household Employment Taxes 2020 Checklist

Schedule H 2020 reports federal employment tax obligations for household employers who pay cash wages to domestic employees. Unlike prior tax years, the 2020 version includes significant pandemic relief provisions under the Families First Coronavirus Response Act that allow eligible household employers to claim tax credits for qualified sick and family leave wages paid between

April 1, 2020, and December 31, 2020.

COVID-19 Relief Provisions on Schedule H 2020

The 2020 Schedule H introduced multiple new lines to accommodate pandemic-related tax credits and employer relief measures. Lines 1b and 2b capture qualified sick and family leave wages that are not subject to the employer share of Social Security tax, while Line 8b reports the nonrefundable portion of the credit for qualified sick and family leave wages.

Line 8e reports the refundable portion of this credit, and lines 8f through 8i capture qualified sick leave wages, qualified family leave wages, and the qualified health plan expenses allocable to those wages.

For deposits due between March 27, 2020, and December 31, 2020, household employers may postpone paying their employer’s share of Social Security tax under the CARES Act. Line 8d reports the maximum amount of the employer share of Social Security tax that you can defer for the year, with one-half of the deferred amount due by December 31, 2021, and the remainder due by December 31, 2022.

Employer Identification Number Requirement

Household employers must obtain an Employer Identification Number to file Schedule H. The

Internal Revenue Service explicitly prohibits using a Social Security number in place of an EIN.

You may apply for an EIN online, by fax, or by mailing Form SS-4 to the IRS. If you applied for an EIN but have not received it by the filing deadline, you may write “Applied For” and the date you applied in the EIN field.

Wage Threshold and Filing Requirements

You must file Schedule H if you paid any one household employee cash wages of $2,200 or more in 2020. Cash wages include payments made by check or money order but exclude the value of food, lodging, clothing, or other noncash items you provide.

Filing is also required if you paid total cash wages of $1,000 or more in any calendar quarter of

2019 or 2020 to all household employees. This threshold triggers federal unemployment tax obligations regardless of whether individual employees met the $2,200 Social Security and

Medicare tax threshold.

Excluded Workers and Wages

Do not count cash wages paid to your spouse, your child under age 21, or your parent when determining whether you meet the filing thresholds. Wages paid to any employee who was under age 18 at any time during 2020 are also excluded unless providing household services was the employee’s principal occupation.

An exception applies for parents if your child living with you was under age 18 or had a physical or mental condition requiring personal care for at least four continuous weeks during the quarter.

Your parents’ wages are included only if you meet specific conditions related to your marital status and your child’s care needs during the calendar quarter in which services were performed.

Form W-2 and Form W-3 Filing

You must file Form W-2 for each household employee to whom you paid $2,200 or more of cash wages in 2020 that are subject to Social Security and Medicare taxes. Filing is also required if you withheld federal income tax from any household employee’s wages, even if those wages fell below the $2,200 threshold.

When filing one or more Forms W-2, you must also file Form W-3 with the Social Security

Administration by February 1, 2021. Electronic filing is encouraged, and the Social Security

Administration generates Form W-3 data automatically when you use the Form W-2 Online service.

Social Security and Medicare Tax Calculations

The Social Security tax rate is 6.2 percent each for the employee and employer, with a wage base limit of $137,700 for 2020. Employer and employee Medicare tax rates are 1.45 percent each, and there is no wage base limit for Medicare tax computations.

You must withhold an Additional Medicare Tax of 0.9 percent from wages you pay to an employee in excess of $200,000 in a calendar year. This additional tax applies only to the employee portion, and no employer share of additional Medicare tax exists under current tax law.

Qualified sick leave wages and qualified family leave wages are not subject to the employer share of Social Security tax under the Families First Coronavirus Response Act. Instead of the combined 12.4 percent tax rate that is applied to wages from regular household employment, the tax rate on these wages is 6.2 percent.

Schedule 2 and Form 1040 Attachment