Publication 926 - Introductory Material


Future Developments

For the latest information about developments related to Pub. 926, such as legislation enacted after it was published, go to www.irs.gov/pub926.

What's New

Social security and Medicare tax for 2016. The social security tax rate is 6.2% each for the employee and employer, unchanged from 2015. The social security wage base limit is $118,500, unchanged from 2015.The Medicare tax rate is 1.45% each for the employee and employer, unchanged from 2015. There is no wage base limit for Medicare tax. Social security and Medicare taxes apply to the wages of household employees you pay $2,000 or more in cash or an equivalent form of compensation.

Retroactive increase in excludible transit benefits for 2015. . The Consolidated Appropriations Act, 2016, increased the monthly transit benefit exclusion from $130 per participating employee to $250 per participating employee for the period of January 1, 2015, through December 31, 2015. Employers will be provided instructions on how to correct the social security and Medicare taxes on the excess transit benefits in future guidance. A link to that guidance will be provided at www.irs.gov/pub926.

Qualified parking exclusion and commuter transportation benefit. For 2016, the monthly exclusion for qualified parking is $255 and the monthly exclusion for commuter highway vehicle transportation and transit passes is $255.

Filing due date for 2016 Forms W-2 and W-3. Both paper and electronically filed 2016 Forms W-2 and W-3 must be filed with the SSA by January 31, 2017.

Reminders

Additional Medicare Tax withholding.  In addition to withholding Medicare tax at 1.45%, you must withhold a 0.9% Additional Medicare Tax from wages you pay to an employee in excess of $200,000 in a calendar year. You are required to begin withholding Additional Medicare Tax in the pay period in which you pay wages in excess of $200,000 to an employee and continue to withhold it each pay period until the end of the calendar year. Additional Medicare Tax is only imposed on the employee. There is no employer share of Additional Medicare Tax. All wages that are subject to Medicare tax are subject to Additional Medicare Tax withholding if paid in excess of the $200,000 withholding threshold. For more information on Additional Medicare Tax, visit IRS.gov and enter “Additional Medicare Tax” in the search box.

Credit reduction states. A state that hasn't repaid money it borrowed from the federal government to pay unemployment benefits is a “credit reduction state.” The Department of Labor (DOL) determines these states. If you paid any wages that are subject to the unemployment compensation laws in any credit reduction state, your federal unemployment (FUTA) tax credit is reduced. See the Instructions for Schedule H (Form 1040) for more information.

Medicaid waiver payments. Notice 2014-7 provides that certain Medicaid waiver payments are excludable from income for federal income tax purposes. See Notice 2014-7, 2014-4, I.R.B. 445, available at www.irs.gov/irb/2014-4_IRB/ar06.html. For more information, including questions and answers related to Notice 2014-7, visit IRS.gov and enter “Medicaid waiver payments” in the search box.

Outsourcing payroll duties. You are responsible to ensure that tax returns are filed and deposits and payments are made, even if you contract with a third party to perform these acts. You remain responsible if the third party fails to perform any required action. If you choose to outsource any of your payroll and related tax duties (that is, withholding, reporting, and paying over social security, Medicare, FUTA, and income taxes) to a third-party payer, such as a payroll service provider or reporting agent, visit IRS.gov and enter “outsourcing payroll duties” in the search box for helpful information on this topic.

Photographs of missing children. The IRS is a proud partner with the National Center for Missing and Exploited Children. Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child.

Introduction

The information in this publication applies to you only if you have a household employee. If you have a household employee in 2016, you may need to pay state and federal employment taxes for 2016. You generally must add your federal employment taxes to the income tax that you will report on your 2016 federal income tax return.

This publication will help you decide whether you have a household employee and, if you do, whether you need to pay federal employment taxes (social security tax, Medicare tax, FUTA, and federal income tax withholding). It explains how to figure, pay, and report these taxes for your household employee. It also explains what records you need to keep.

This publication also tells you where to find out whether you need to pay state unemployment tax for your household employee.

Comments and suggestions.   We welcome your comments about this publication and your suggestions for future editions.

  You can send us comments from www.irs.gov/formspubs. Click on More Information and then click on Give us feedback.

  Or you can write to:

Internal Revenue Service 
Tax Forms and Publications  
1111 Constitution Ave. NW, IR-6526 
Washington, DC 20224

  We respond to many letters by telephone. Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence.

  Although we can't respond individually to each comment received, we do appreciate your feedback and will consider your comments as we revise our tax forms, instructions, and publications.

Tax questions.   If you have an employment tax question, check the information available on IRS.gov or call 1-800-829-4933 (TDD/TTY for persons who are deaf, hard of hearing, or have a speech disability at 1-800-829-4059) Monday–Friday from 7:00 a.m.–7:00 p.m. local time (Alaska and Hawaii follow Pacific time). We can't answer tax questions sent to the above address.


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