They might be regarded as household employees if you regularly engage people to perform work around your home. Employer obligations include submitting a Schedule H with your federal tax return and being responsible for paying and reporting employment taxes. However, even if you have home employees, you only need to file Schedule H if the total amount of earnings you pay them exceeds a set limit as determined by federal tax law. I am talking about Schedule H household employment taxes.
Household employees defined
Independent contractors that do services in your home are not regarded as household employees. For instance, the occasional babysitters, electricians, and plumbers you hire are independent contractors who handle their employment taxes.
Typical household employees include housekeepers, maids, nannies, and babysitters, provided that you have control over the responsibilities assigned to them and how they are carried out. It depends on the particulars of each instance. However, a nanny who lives with you and looks after your kids five days a week is more likely to be a household employee than the plumber you contact occasionally.
When Schedule H must be filed
Only if you pay any one employee at least $2,400 in the 2022 tax year, or if you pay all household employees cash compensation totaling at least $1,000 during any three-month calendar quarter of either the current or prior tax year, do you need to file Schedule H. Even though you are not required to deduct federal income tax from the pay of household employees, you must file Schedule H if you do so on the employee’s behalf.
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Household employment taxes
The three taxes that are deducted from all employee salaries are covered by the household employment taxes that you would need to report on Schedule H: the 12.4 percent Social Security tax, the 2.9 percent Medicare tax, and the 6 percent federal unemployment tax, or FUTA. Schedule H deducts them from your FUTA rate if you also pay state unemployment insurance taxes.
You are responsible for paying the entire FUTA; employees do not deduct contributions. Additionally, you are responsible for paying half of each household employee’s Social Security and Medicare tax obligation; the employee is responsible for the other half through deductions from her pay. If the Internal Revenue Service is the recipient of these taxes, you must
How Schedule H affects your 1040
The three methods for calculating your employment tax liability—which is based on the total amount of compensation you paid to home employees—are made easier to compute with Schedule H. Once you have finished Schedule H and are aware of the total household employment tax for which you are responsible, put the appropriate amount on the corresponding line in the “Other Taxes” section of Schedule 2 for Form 1040 and add it to your yearly income tax liability. Schedule H household employment taxes
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