OVERVIEW
If you hire people to do work around your house on a regular basis, they might be considered household employees. Being an employer comes with some responsibilities for paying and reporting employment taxes, which includes filing a Schedule H with your federal tax return. But even if you have household employees, filing Schedule H is required only if the total wages you pay them is more than certain threshold amounts specified by federal tax law.
Household employees defined
People who provide services at your home as independent contractors aren't treated as household employees. The plumbers, electricians and babysitters you occasionally hire, for example, are independent contractors who take care of their own employment taxes.
Household employees commonly include housekeepers, maids, nannies and babysitters if you control which tasks they're responsible for and how they complete them. It essentially depends on the facts and circumstances of each situation. But if you have a nanny who lives in your home and takes care of your children five days per week, she's more likely a household employee than the plumber you call a few times per year.
When Schedule H must be filed
Your tax return must include Schedule H only if you pay any single employee at least $2,400 in the 2022 tax year, or cash wages to all household employees totaling $1,000 or more during any three-month calendar quarter during either the current or previous tax year. Although you're not required to withhold federal income tax from a household employee's wages, you must file Schedule H if you do withhold tax for an employee who requests it.
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Household employment taxes
The household employment taxes that you may have to account for on Schedule H cover the same three taxes that are withheld from all employment wages: the 12.4 percent Social Security tax, a 2.9 percent Medicare tax and the 6 percent federal unemployment tax, or FUTA. If you also pay state unemployment insurance taxes, Schedule H gives you credit for them by reducing the FUTA rate.
You are responsible for paying all of FUTA—employees don't make contributions through withholding. You also must pay half of each household employee's Social Security and Medicare tax liability; the employee pays the other half through amounts you withhold from her wages. If you have to pay these taxes to the Internal Revenue Service, Schedule H calculates the precise amount that you should have withheld, as well as the portion you owe.
How Schedule H affects your 1040
Schedule H helps you calculate the three formulas needed to figure out how much employment tax you owe—which is based on the total amount of wages you paid out to household employees. Once you complete Schedule H and know the total amount of household employment tax for which you're liable, enter the figure on the relevant line in the “Other Taxes” section of Schedule 2 for Form 1040 and combine it with your personal income tax bill for the year.
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