Read on for our straightforward CPA guide to completing the Schedule H for Household Employment taxes! Don't worry - this is easy and once you have the correct information gathered, you can get this done in a matter of minutes.
What Is the Schedule H?
Schedule H, Household Employment Taxes, is a form that household employers use to report household employment taxes to the IRS. A Schedule H breaks down household employee payment and tax information.
You must file an IRS Schedule H if one or more of the following is true:
You pay at least one household employee cash wages of $2,100 or more in the calendar year
You pay total cash wages of $1,000 or more in any calendar quarter of the current or previous tax year to all household employees
A household employee asks you to withhold federal income tax
When determining whether or not you must file Schedule H, do not count cash wages paid to your spouse, child under age 21, or parent (with a couple of exceptions).
Who Counts As a Household Employee?
This post is designed to walk household employers through filling out the Schedule H, so they most likely have already determined that they have a household employee. If you want help deciding if you have an employment tax and reporting obligation, check out this article (it refers to nanny taxes, but applies to all household employers) or go straight to the source and read the IRS's definition of a household employee.
Household Employment Taxes
Account for household employment taxes, otherwise known as nanny taxes, on your Schedule H tax form. Household employment taxes typically include Social Security, Medicare, and federal unemployment taxes (FUTA tax).
For a detailed explanation of all required taxes, check out our guide to nanny and household employment taxes here.
How & When To Fill Out the Schedule H
Your Schedule H gets filed along with your regular Form 1040 US Individual Income Tax Return, so it will need to be filed by your regular tax deadline (April 15, 2021 for 2020 taxes) or, if you file an extension, by your extended tax deadline. Note, payments for taxes owed are still due by the original deadline, regardless of extensions.
Here are your options for filling out Schedule H:
Use your tax preparation software (ie. TurboTax) to fill it out along with your tax return.
Fill it out manually by downloading the file and completing the pdf (should take 20 minutes or so).
Now let's walk through each option:
Fill Out Schedule H With Your Tax Preparation Software
This is what I would recommend for most taxpayers and this is how I have completed my nanny tax filing for the past 6 years. Your tax prep software (like TurboTax, TaxAct, etc.) has this schedule included and you'll just follow the prompts when they ask you something like, "Did you pay a household employee this year?"
To accurately follow your tax software's prompts, you will need the following information handy:
Nanny's name and Social Security Number (SSN)
Your child(ren)'s names and SSNs
Your Employer Identification Number (EIN)
Wages paid to your household employee(s) - add up all of the wages (pre-tax) that you paid your employee during the year - if you've used a nanny payroll service you can run a report to include gross wages paid for all dates during the year
Social Security and Medicare taxes withheld
Income tax deducted from your employee's wages (if applicable)
Estimated tax payments made during the year
One thing to note: If you made estimated tax payments during the year to cover employment taxes, your tax software will prompt you to enter these payments, but you may enter them later in the process (in the "Credits" section) AFTER you enter your employment tax information. This may result in your estimated taxes due looking really high until you can enter your estimated tax payments, which will then reduce your tax due balance. So have patience and don't get overwhelmed!
Completing The Schedule H Manually
This is a good option if you have a CPA that prepares your taxes for you and you send files over to be consolidated into your individual tax return. It might save you some money on your CPA's hourly fees. If you decide to go this route, gather the following information and download the schedule. (This is the 2019 version; I'll update the post once the 2020 version is released). You will need:
Your name, SSN, and Employer Identification Number (EIN)
Wages paid to your household employee(s) - add up all of the wages (pre-tax) that you paid your employee during the year
Social Security and Medicare taxes withheld
FUTA tax liability
Income tax deducted from the employee’s wages (if applicable)
Step 1: Enter the name you registered as an employer with (make sure it matches your EIN document), your social security number (either spouse if married filing jointly), and EIN.
Don't have an EIN yet? Watch our quick video tutorial on how to get one.
A: Did you pay any one of your household employees $2,100 or more for the year?
If so, check Yes and skip to Part 1, Question 1.
If no, check No and move on to Question B.
B: Did you withhold federal income tax on those wages? This is optional for household employers - it needs to be agreed upon with your employee. Check yes or no.
C: If you didn't pay your employee $2,100 for the year and you didn't withhold federal income taxes, there is one more test to see if you're liable for any employment taxes. Did you pay total cash wages of $1,000 or more in any calendar quarter in the past 2 years to all household employees. For example, if you had 2 part-time nannies and paid them $600 each in the same quarter, that would total $1,200 in wages and you would select "Yes" for this question.
If the answer is No, you don't have to file Schedule H.
1.1: Enter total cash wages paid to your nanny or household employee(s). This should represent total gross wages (hourly rate * hours worked) and should not be reduced by any taxes taken out of your employee's paycheck.
A best practice is to keep a running total of wages paid to your employee throughout the year, either on a spreadsheet or through a payroll service
Nanny Files members should run the "Payroll Register" report for the full year, scroll to the green "Totals" section at the bottom, and record the "Gross Pay" amount.
1.2: Multiply your total wages by 12.4% (.124) and enter this number.
1.3: Enter the same total wages amount from above.
1.4: Multiply the total wages by 2.9% (.029) and enter this number.
1.5: Unless you pay your household employee more than $200,000 per year you can skip this line.
1.7: If you and your employee agreed to withhold federal income taxes, record the amount withheld here. This does NOT include amounts withheld for Social Security and Medicare taxes.
Part 1.8: Add lines 2, 4, 6, and 7 to arrive at total taxes due related to household employment for the year. Don't worry - if you made estimated tax payments during the year, you'll be able to record those later.
Part 1.9: Did you pay total cash wages of $1,000 or more in any calendar quarter in the past 2 years to all household employees. For example, if you had 2 part-time nannies and paid them $600 each in the same quarter, that would total $1,200 in wages and you would select "Yes" for this question.
If "No," you don't have to fill out the rest of the form. You can take the number from Part 1.8 above and enter it directly into your Form 1040, Schedule 2, Line 7a.
If "Yes," continue on.
Part 2.10: Did you pay unemployment contributions (also known as SUI or SUTA) to only one state? Don't worry about the credit reduction state piece this year - luckily, we don't have any right now.
Part 2.11: Did you pay all state unemployment contributions for the year by April 15th (or will you)?
Part 2.12: Were all wages that are taxable for FUTA tax also taxable for your state's unemployment tax? In all likelihood, the answer is yes.
If you checked "Yes" for all 3 checkboxes in Part 2, go to Section A. Most likely, this will be the case. In the example that you moved mid-year, you may have had to pay state taxes to multiple states. In that case, fill out Section B and record taxes paid to each state.
Part 2.13: Name of state where you paid employment taxes
Part 2.14: Contributions paid to state unemployment fund.
The most accurate way to get this number is to log into your state tax account and look this number up, since it will reflect any rate changes in your account during the year.
Nanny Files members can also look on the same Payroll Register report in the Totals section and look for the SUTA taxes paid.
Don't include any taxes paid to other state agencies, like income taxes or paid leave contributions.
Part 2.15: Total cash wages - you can use the same amount from Part 1.
Part 2.16: Multiply total cash wages by 0.6% (.006) and skip Section B.
Part 3.25: Enter total taxes from Part 1, Line 8.
Part 3.26: Add total FUTA taxes from line 16 or 24 to the total taxes in line 25
Part 3.27: Are you required to file an individual tax return (Form 1040)? In most cases, check yes.
Take your total number from line 26 and add it to your Form 1040, line 7a. If you're giving this form to your CPA, s/he can handle this for you. You don't need to fill out Part 4 with your address and signature.
That wasn't so bad, right? If you thought this was helpful, check out our other detailed guides for DIY'ing nanny taxes. If you want a little extra help, our affordable nanny tax and payroll plans help families save tons of time and money.