Calculate household employer taxes with Schedule H

What is Schedule H?

You can use Schedule H to calculate and pay taxes for household employees, which is informally known as the “nanny tax.”

If you pay cash wages of $2,600 or more during any quarter of the tax year for domestic personal services to one or more household employees, your household must:

• Obtain a Tax Identification Number.
• Register as a household employer.
• File Forms W-3 and W-2, in addition to Schedule H.

Domestic personal service providers include, but are not limited to:

• Nannies and babysitters
• Cleaners and housekeepers
• Butlers
• Gardeners
• Drivers

Who is a household employee?

Certain factors determine that you have a household employee. If you can control the work they do and often provide supplies and equipment necessary for the job, the worker is considered your household employee, regardless of how many hours they worked during the year on a full-time or part-time basis.

If an agency simply connected you with a domestic worker but does not take responsibility for how the work is performed, the worker is likely your household employee. If the worker makes their services available to the public and provides their own supplies and equipment, they are self-employed.

In addition to filing Schedule H, you must also complete Form I-9 to ensure each household employee is authorized to work in the United States. You may also need to make state and local household employment tax payments and unemployment contributions.

Payroll and federal income taxes

At the top of Schedule H, Items A, B, and C indicate whether you are required to file Schedule H.

• If you paid more than $1,000 but less than $2,600 to household employees, you only need to fill out Part II.
• If you paid $2,600 or more, you also need to fill out Part I.

In Item B, indicate whether you withheld federal income tax from the household employee’s paychecks. Even if you paid less than $1,000 to the employee during the tax year, you may still need to file Schedule H to report and remit payroll and federal income taxes.

In Part I, report the total cash wages you paid to all household employees on Line 1a. Compute your share of Social Security taxes on Line 2a, and Medicare taxes on Line 4. If you withheld any federal income tax from the employee’s paychecks, enter this number on Line 7.

If sick and family leave is included in any of these amounts, indicate that on Lines 1b, 2b, and 8b. Lines 8a through 8i itemize various benefits given to household employees, such as health plan expenses, and indicate whether you qualify for nonrefundable and refundable tax credits for providing sick and family leave.

On Line 9, indicate whether you paid $1,000 or more in cash wages in any calendar quarter of the year.

• If not, report on Schedule 2 of Form 1040 the amount on Line 8c for total Social Security, Medicare, and federal income taxes after the nonrefundable family leave credit.
• If yes, proceed to Line 10 in Part II to compute federal unemployment taxes.

Federal unemployment taxes (FUTA)

Report federal and state unemployment contributions in Part II.

• Line 10 indicates whether you made these contributions to one state or more, as certain states may reduce your credit.
• On Line 11, indicate whether you made state unemployment contributions before April 15 of the following tax year.
• On Line 12, indicate whether the wages taxable for FUTA purposes were also taxable for state unemployment purposes.
• In Section A on Line 13, name the state where you paid the unemployment contributions and the total amount on Line 14.
• Report the cash wages subject to FUTA tax on Line 15 and compute the 6% FUTA tax on Line 16.
• You only need to fill out Section B if you paid into multiple state unemployment funds, and the calculation for FUTA wages is more complex.

When you compute the total FUTA tax in either section, this number carries to Line 26 in Part III.

Total household employment taxes and signature

Enter the total amount of payroll and FUTA taxes in Part III.

• If Form 1040 is required, the amount on Line 26 carries to Schedule 2.
• If Form 1040 is not required (for example, when an estate filing Form 1041 is still paying the decedent's household employees to maintain the property), you must fill out and sign Part IV.

Confused? We can help. A Jackson Hewitt Tax Pro can explain this form and help you fill it out, with any supporting documentation or calculations you may need. Taxes can be complicated, but you are not on your own. Contact us today.

About the Author

Mark Steber is Senior Vice President and Chief Tax Officer for Jackson Hewitt. With over 30 years of experience, he oversees tax service delivery, quality assurance and tax law adherence. Mark is Jackson Hewitt’s national spokesperson and liaison to the Internal Revenue Service and other government authorities. He is a Certified Public Accountant (CPA), holds registrations in Alabama and Georgia, and is an expert on consumer income taxes including electronic tax and tax data protection.

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