Topic Number 756 - Employment Taxes for Household Employees
Household employees include housekeepers, maids, babysitters, gardeners, and others who work in or around your private residence as your employee. Repairmen, plumbers, contractors, and other business people who provide their services as independent contractors, are not your employees. Household workers are your employees if you can control not only the work they do but also how they do it.
Social Security and Medicare Taxes (Federal Insurance Contributions Act – FICA)
The social security and Medicare taxes, also commonly referred as FICA tax, applies to both employees and employers, each paying 7.65 percent of wages. An employer is generally required to withhold the employee’s share of FICA tax from wages. If you pay cash wages of $2,100 or more for 2019 (this threshold can change from year to year) to any one household employee, you generally must withhold 6.2% of social security and 1.45% of Medicare taxes (for a total of 7.65%) from all cash wages you pay to that employee, unless you prefer to pay your employee's share of social security and Medicare taxes from your own funds. You must also pay your share of social security and Medicare taxes, which is also 7.65% of cash wages (cash wages include wages you pay by check, money order, etc.).
You can find the specified dollar amounts and percentages under the topic "Do You Need To Pay Employment Taxes?" in Publication 926.pdf, Household Employer's Tax Guide. Pay the amount you withhold to the IRS with an additional 7.65% for your share of the taxes. If you pay your employee's share of social security and Medicare taxes from your own funds, the amounts you pay for your employee count as wages for purposes of the employees' income tax. However, don't count them as social security and Medicare wages or as wages for federal unemployment tax.
Don't withhold or pay social security and Medicare taxes from wages you pay to:
- Your spouse,
- Your child who is under age 21,
- Your parent, unless an exception is met, or
- An employee who is under age 18 at any time during the year, unless performing household work is the employee's principal occupation. If the employee is a student, providing household work isn't considered to be his or her principal occupation.
See Publication 926.pdf for more information on these exceptions.
Additional Medicare Tax
Additional Medicare Tax applies to an individual's Medicare wages that exceed a threshold amount based on the taxpayer's filing status. Employers are responsible for withholding the 0.9% Additional Medicare Tax on an individual's wages paid in excess of $200,000 in a calendar year, without regard to filing status. An employer is required to begin withholding Additional Medicare Tax in the pay period in which it pays wages in excess of $200,000 to an employee and continue to withhold it each pay period until the end of the calendar year. There's no employer match for Additional Medicare Tax. For more information, visit Questions and Answers for the Additional Medicare Tax.
Federal Income Tax Withholding
You're not required to withhold federal income tax from wages you pay to a household employee. However, if your employee asks you to withhold federal income tax and you agree, you'll need a completed Form W-4.pdf, Employee's Withholding Allowance Certificate from your employee. See Publication 15, (Circular E), Employer's Tax Guide for tax withholding tables that are updated each year.
Form W-2, Wage and Tax Statement
If you must withhold and pay social security and Medicare taxes, or if you withhold federal income tax, you'll need to complete Form W-2.pdf, Wage and Tax Statement for each employee. You'll also need a Form W-3.pdf, Transmittal of Wage and Tax Statement. See "What Forms Must You File?" in Publication 926.pdf for information on when and where to furnish and file these forms. To complete Form W-2, you'll need an employer identification number (EIN) and your employees' social security numbers. If you don't already have an EIN, you can apply for one using the online EIN application. This service is available Monday through Friday, 7 a.m. to 10 p.m. Eastern time. You can also apply for an EIN by mailing or faxing a completed Form SS-4.pdf, Application for Employer Identification Number. International applicants may apply by calling 267-941-1099 (not a toll-free number) Monday through Friday, 6 a.m. to 11 p.m. Eastern time to obtain their EIN. Refer to Employer ID Numbers, Topic No. 752 and Topic No. 755 for further information.
Federal Unemployment Tax Act (FUTA)
If you paid cash wages to household employees totaling more than $1,000 in any calendar quarter during the calendar year or the prior year, you generally must pay federal unemployment tax (FUTA) tax on the first $7,000 of cash wages you pay to each household employee. However, don't count wages paid to your spouse, your child who is under the age of 21, or your parent. Also, don't consider the amounts you pay to these individuals as wages subject to FUTA tax. Generally, you can take a credit against your FUTA tax liability for amounts you paid into state unemployment funds. If you paid wages that are subject to the unemployment compensation laws of a credit reduction state, your FUTA tax credit may be reduced. A state that hasn't repaid money it borrowed from the federal government to pay unemployment benefits is a "credit reduction state." See the Form 1040, Schedule H Instructions or FUTA Credit Reduction for more information. For specific dollar amounts and wages not counted, look under the heading "Do You Need To Pay Employment Taxes?" in Publication 926.pdf.
Schedule H (Form 1040), Household Employment Taxes
If you pay wages subject to FICA tax, FUTA tax, or if you withhold federal income tax from your employee's wages, you'll need to file a Form 1040, Schedule H.pdf, Household Employment Taxes. Attach Schedule H to your individual income tax return, Form 1040.pdf, U.S. Individual Income Tax Return, Form 1040NR.pdf, U.S. Nonresident Alien Income Tax Return, Form 1040-SS.pdf, U.S. Self-Employment Tax Return (Including the Additional Child Tax Credit for Bona Fide Residents of Puerto Rico), or Form 1041.pdf, U.S. Income Tax Return for Estates and Trusts. If you're not required to file a return, you must still file Schedule H to report household employment taxes. However, a sole proprietor who must file Form 940.pdf, Employer's Annual Federal Unemployment (FUTA) Tax Return, and Form 941.pdf, Employer's QUARTERLY Federal Tax Return, or Form 944.pdf, Employer's ANNUAL Federal Tax Return, for business employees, or Form 943.pdf, Employer's Annual Federal Tax Return for Agricultural Employees, for farm employees, may report household employee tax information on these forms instead of on Schedule H. If you choose to report the wages for a household employee on the forms shown above, be sure to pay any taxes due by the date required based on the form, making federal tax deposits if required. Additional information is available in the Form 1040, Schedule H Instructions.
Estimated Tax Payments
If you file Form 1040, Schedule H.pdf, you can avoid owing taxes with your return if you pay enough tax before you file your return to cover both the employment taxes for your household employee and your income tax. If you're employed, you can ask your employer to withhold more federal income tax from your wages during the year. You can also make estimated tax payments to the IRS during the year using Form 1040-ES.pdf, Estimated Tax for Individuals.
You may have to pay an estimated tax underpayment penalty if you don't pay your household employment taxes during the year. Refer to Topic No. 306.
For more information, refer to Publication 926.pdf, Household Employer's Tax Guide.