Tax Topic #756 |
2008 Tax Year |
Topic 756 - Employment Taxes for Household Employees
Household employees include housekeepers, maids, baby-sitters, gardeners,
and others who work in or around your private residence as your employees.
Repairmen, plumbers, contractors, and other business people who work for you
as independent contractors, are not your employees. Household workers are
your employees if you can control not only the work they do but how they do
it.
Social Security and Medicare Taxes (Federal Insurance Contributions Act
— FICA)
If you pay a household employee cash wages of more than the amount specified
by law in a tax year ($1,600 for 2008; $1,500 for 2007 and 2006), you generally
must withhold social security and Medicare taxes from all cash wages you pay
to that employee. (Cash wages include wages you pay by check or money order.)
Unless you prefer to pay your employee's share of social security and Medicare
taxes from your own funds, you should withhold 7.65 percent from each payment
of cash wages. The specified dollar amount and percentages can be found under
the topic "Do You Need To Pay Employment Taxes?" in Publication 926 (PDF). Instead of paying this amount to your employee, pay
it to the IRS with a matching amount for your share of the taxes. If you pay
your employee's share of social security and Medicare taxes from your own
funds, these amounts must be included in the employee's wage for income tax
purposes. However, they are not counted as social security and Medicare wages
or as Federal unemployment wages. Do not withhold or pay these 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 is not considered to be his or her principal
occupation.
Federal Income Tax WithholdingYou are 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 will need Form W-4 (PDF), Employee's
Withholding Allowance Certificate, and Publication 15,
(Circular E), Employer's Tax Guide, which has tax withholding tables.
Form W-2, Wage and Tax StatementIf you withhold or pay social security and Medicare taxes, or withhold
Federal income tax, you will need to file Form W-2 (PDF), Wage
and Tax Statement, after the end of the year. You will also need a Form W-3 (PDF), Transmittal of Wage and Tax Statement.
To complete Form W–2 you will need both an employer identification number
and your employees' social security number. If you do not already have an
employer identification number (EIN), one can be requested by submitting Form SS-4 (PDF), Application for Employer Identification
Number, or electronically, by accessing the "Businesses" link on the
IRS website at www.irs.gov and clicking on "Employer ID Numbers" under "Related
Topics". IRS assistors will provide you with an EIN via the phone if you cannot
use the Internet application. Call 800–829–4933 7:00 a.m. to 10:00
p.m. Refer to Topic 752 and Topic 755 for further information.
Federal Unemployment Tax Act (FUTA)If you paid cash wages to household employees totaling more than the specified
dollar amount in any calendar quarter of the prior 2 years, you generally
must pay Federal unemployment tax on a portion of the specified amount of
cash wages you pay to each of your household employees in the current and
following taxable years. For specific amounts look under the heading "Do You
Need To Pay Employment Taxes?" in Publication 926 (PDF).
Schedule H, Household Employment TaxesIf you must file Form W–2 or pay Federal unemployment tax, you will
also need to file a Form 1040, Schedule H (PDF), Household
Employment Taxes, after the end of the year with your individual income
tax return, Form 1040 (PDF), U.S. Individual
Income Tax Return. If you are not required to file a Form 1040, 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, Employer's Annual Federal Tax Return, for business employees,
or Form 943 (PDF), Employer's Annual Tax Return
for Agricultural Employees, for farm employees, may include household
employee tax information on these forms.
You can avoid owing tax with your return if you pay enough Federal income
tax before you file, to cover both the employment taxes for your household
employee and your income tax. If you are 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 or increase the
payments you already make. Use Form 1040-ES (PDF) to
make estimated tax payments.
You may have to pay an estimated tax penalty if you do not prepay your
household employment taxes during the year. Refer to Topic 306.
For more information, refer to Publication 926, Household Employer's
Tax Guide.
Page Last Reviewed or Updated: December 22, 2008
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