Filing Schedule H and Paying the Federal Government

Typically, household employers are required to report to the federal government once a year at tax time (April 15th) by filing  a Schedule H (Household Employment Taxes) with their own income tax returns.  The Schedule H lists the federal employment taxes you withheld or owe for the relevant tax year.  Employment taxes may include FICA, and federal income tax withholding, your  employer's  share of FICA, and your  FUTA liability.  Any advance Earned Income Credit (EIC) payments you made to your employee should also be reflected on your Schedule H.  You add all your employment tax liability reflected on your Schedule H to your Form 1040 or 1040A, and pay it as part of your  federal income tax liability.   If you also have other employees who work for you in your business, see the Rules for Business Employers section for other payment options.  See Publication 926 for more information on making your federal tax payments.

A word of caution is necessary.  Changes in federal law over the past several years have eliminated some of the paperwork burden on household employers. Filing federal quarterly employment tax returns,  for example, is no longer required for household employers.  If you are interested in a brief historical perspective on these legal changes, see Nanny Tax Laws: A Short History.  Although, the paperwork burden is no longer as great, you must remember that your increased household employment tax liability may require you to increase your own  withholding, make quarterly estimated tax payments to cover your  increased liability, or risk being assessed a penalty for underpayment of taxes.  So much for tax law simplification!  You should consult with your tax professional to determine your appropriate tax payment plan. 

Filing Quarterly Reports and Paying Your State Government

While the IRS has simplified the federal reporting and payment provisions for household employers, there has been little simplification at the state level.  Most states have an income tax, and generally require you to withhold it from your employee’s pay, which is remitted to the state, usually on a quarterly basis. You may also have to withhold or pay contributions to your state unemployment or workers' disability insurance funds.   Unfortunately, there is no standard state reporting forms so you will have to inquire with your state revenue department to learn about quarterly reporting procedures and the appropriate forms to file.  You should also check with your state's labor department, which typically requires employers to pay or collect other state employment taxes or carry workers' compensation insurance.   That department may also have its own reporting procedures.  A listing of state addresses,  telephone numbers, and web sites may be found in the State Withholding  and State Unemployment Tax Agencies sections.