Publication 926 - Household Employer's Tax Guide - Do You Need To Pay Employment Taxes?

Publication 926

Previous Page | Table of Contents | Index | Next Page Right Arrow

taxmap/pubs/p926-002.htm#en_us_publink100086732

If you have a household employee, you may need to withhold and pay social security and Medicare taxes, pay federal unemployment tax, or both. To find out, read Table 1.

You do not need to withhold federal income tax from your household employee's wages. But if your employee asks you to withhold it, you can. See Do You Need To Withhold Federal Income Tax, later.

If you need to pay social security, Medicare, or federal unemployment tax or choose to withhold federal income tax, read Table 2 for an overview of what you may need to do.

If you do not need to pay social security, Medicare, or federal unemployment tax and do not choose to withhold federal income tax, read State employment taxes, next. The rest of this publication does not apply to you.

taxmap/pubs/p926-002.htm#en_us_publink100086734

You should contact your state unemployment tax agency to find out whether you need to pay state unemployment tax for your household employee. For a list of state unemployment tax agencies, visit the U.S. Department of Labor's website at www.workforcesecurity.doleta.gov/unemploy/agencies.asp. You should also determine if you need to pay or collect other state employment taxes or carry workers' compensation insurance.

taxmap/pubs/p926-002.htm#en_us_publink1000264776

Table 1. Do You Need To Pay Employment Taxes?

IF you ...		THEN you need to ...
A–	Pay cash wages of $1,800 or more in 2013 to any one household employee.	Withhold and pay social security and Medicare taxes. The taxes are 15.3%¹ of cash wages. Your employee's share is 7.65%¹. (You can choose to pay it yourself and not withhold it.) Your share is 7.65%.
	Do not count wages you pay to— Your spouse, Your child under the age of 21, Your parent (see Wages not counted, later, for an exception), or Any employee under the age of 18 at any time in 2013 (see Wages not counted, later, for an exception).
B–	Pay total cash wages of $1,000 or more in any calendar quarter of 2012 or 2013 to household employees.	Pay federal unemployment tax. The tax is 6% of cash wages. Wages over $7,000 a year per employee are not taxed. You also may owe state unemployment tax.
	Do not count wages you pay to— Your spouse, Your child under the age of 21, or Your parent.
¹In addition to withholding Medicare tax at 1.45%, you must withhold a 0.9% Additional Medicare Tax from wages you pay to an employee in excess of $200,000 in a calendar year. You are required to begin withholding Additional Medicare Tax in the pay period in which you pay wages in excess of $200,000 to an employee and continue to withhold it each pay period until the end of the calendar year. Additional Medicare Tax is only imposed on the employee. There is no employer share of Additional Medicare Tax. All wages that are subject to Medicare tax are subject to Additional Medicare Tax withholding if paid in excess of the $200,000 withholding threshold.
Note. If neither A nor B above applies, you do not need to pay any federal employment taxes. But you may still need to pay state employment taxes.

taxmap/pubs/p926-002.htm#en_us_publink1000264777

Table 2. Household Employer's Checklist

You may need to do the following things when you have a household employee.

When you hire a household employee:	□ Find out if the person can legally work in the United States. □ Find out if you need to pay state taxes.
When you pay your household employee:	□ Withhold social security and Medicare taxes. □ Withhold federal income tax. □ Decide how you will make tax payments. □ Keep records.
By January 31, 2014:	□ Get an employer identification number (EIN). □ Give your employee Copies B, C, and 2 of Form W-2, Wage and Tax Statement.
By February 28, 2014 (March 31, 2014, if you file Form W-2 electronically):	□ Send Copy A of Form W-2 to the Social Security Administration (SSA).
By April 15, 2014:	□ File Schedule H (Form 1040), Household Employment Taxes, with your 2013 federal income tax return (Form 1040, 1040NR, 1040-SS, or Form 1041). If you do not have to file a return, file Schedule H by itself.

taxmap/pubs/p926-002.htm#en_us_publink100086735

Federal Income, Social Security, and Medicare Taxes

The social security tax pays for old-age, survivors, and disability benefits for workers and their families. The Medicare tax pays for hospital insurance.

Both you and your household employee may owe social security and Medicare taxes. Your share is 7.65% (6.2% for social security tax and 1.45% for Medicare tax) of the employee's social security and Medicare wages. Your employee's share is also 7.65% (6.2% for social security tax and 1.45% for Medicare tax). In addition to withholding Medicare tax at 1.45%, you must withhold a 0.9% Additional Medicare Tax from wages you pay to an employee in excess of $200,000 in a calendar year. You are required to begin withholding Additional Medicare Tax in the pay period in which you pay wages in excess of $200,000 to an employee and continue to withhold it each pay period until the end of the calendar year. Additional Medicare Tax is only imposed on the employee. There is no employer share of Additional Medicare Tax. All wages that are subject to Medicare tax are subject to Additional Medicare Tax withholding if paid in excess of the $200,000 withholding threshold.

Generally, you can use Table 3 to figure the amount of social security and Medicare taxes to withhold from each wage payment.

You are responsible for payment of your employee's share of the taxes as well as your own. You can either withhold your employee's share from the employee's wages or pay it from your own funds. If you decide to pay the employee's share from your own funds, see Not withholding the employee's share, later. Pay the taxes as discussed under How Do You Make Tax Payments, later. Also, see What Forms Must You File, later.

taxmap/pubs/p926-002.htm#en_us_publink100086737

You figure social security and Medicare taxes on the social security and Medicare wages you pay your employee.

If you pay your household employee cash wages of $1,800 or more in 2013, all cash wages you pay to that employee in 2013 (regardless of when the wages were earned) up to $113,700 are social security wages and all cash wages are Medicare wages. However, any noncash wages you pay do not count as social security and Medicare wages.

If you pay the employee less than $1,800 in cash wages in 2013, none of the wages you pay the employee are social security and Medicare wages and neither you nor your employee will owe social security or Medicare tax on those wages.

taxmap/pubs/p926-002.htm#en_us_publink100086738

Cash wages include wages you pay by check, money order, etc. Cash wages do not include the value of food, lodging, clothing, and other noncash items you give your household employee. However, cash you give your employee in place of these items is included in cash wages.

taxmap/pubs/p926-002.htm#en_us_publink100086739

Certain state disability plan payments that your household employee may receive are treated as social security and Medicare wages. For more information about these payments, see the Instructions for Schedule H (Form 1040) and the notice issued by the state.

taxmap/pubs/p926-002.htm#en_us_publink100086740

Do not count wages you pay to any of the following individuals as social security and Medicare wages, even if these wages are $1,800 or more during the year.

Your spouse.
Your child who is under the age of 21.
Your parent. Exception: Count these wages if both the following conditions apply.
1. Your parent cares for your child who is either of the following.
  1. Under the age of 18, or
  2. Has a physical or mental condition that requires the personal care of an adult for at least 4 continuous weeks in each calendar quarter services were performed.
2. Your marital status is one of the following.
  1. You are divorced and have not remarried,
  2. You are a widow or widower, or
  3. You are living with a spouse whose physical or mental condition prevents him or her from caring for your child for at least 4 continuous weeks in each calendar quarter services were performed.
An employee who is under the age of 18 at any time during the year. Exception: Count these wages if providing household services is the employee's principal occupation. If the employee is a student, providing household services is not considered to be his or her principal occupation.

Also, if your employee's cash wages reach $113,700 (maximum wages subject to social security tax) in 2013, do not count any wages you pay that employee during the rest of the year as social security wages to figure social security tax. Continue to count the employee's cash wages as Medicare wages to figure Medicare tax.

If you provide your employee transit passes to commute to your home, do not count the value of the transit passes (up to $245 per month for 2013) as wages. A transit pass includes any pass, token, fare card, voucher, or similar item entitling a person to ride on mass transit, such as a bus or train.

If you provide your employee parking at or near your home or at or near a location from which your employee commutes to your home, do not count the value of parking (up to $245 per month for 2013) as wages.

If you reimburse your employee for transit passes or parking, you may be able to exclude the reimbursement amounts. See Publication 15-B, Employer's Tax Guide to Fringe Benefits, for special requirements for this exclusion.

taxmap/pubs/p926-002.htm#en_us_publink100086741

You should withhold the employee's share of social security and Medicare taxes if you expect to pay your household employee cash wages of $1,800 or more in 2013. However, if you prefer to pay the employee's share yourself, see Not withholding the employee's share, later.

You can withhold the employee's share of the taxes even if you are not sure your employee's cash wages will be $1,800 or more in 2013. If you withhold the taxes but then actually pay the employee less than $1,800 in cash wages for the year, you should repay the employee.

Withhold 7.65% (6.2% for social security tax and 1.45% for Medicare tax) from each payment of social security and Medicare wages. Generally, you can use Table 3 to figure the proper amount to withhold. You will pay the amount withheld to the IRS with your share of the taxes. Do not withhold any social security tax after your employee's social security wages for the year reach $113,700.

taxmap/pubs/p926-002.htm#en_us_publink1000264780

Table 3. Employee Social Security (6.2%) and Medicare (1.45%¹) Tax Withholding Table

(See Publication 15 (Circular E) for income tax withholding tables.)

Use this table to figure the amount of social security and Medicare taxes to withhold from each wage payment. For example, on a wage payment of $180, the employee social security tax is $11.16 ($6.20 tax on $100 plus $4.96 on $80 wages). The employee Medicare tax is $2.61 ($1.45 tax on $100 plus $1.16 on $80 wages).
If wage payment is:		The social security tax to be withheld is:	The Medicare tax to be withheld is:	If wage payment is:		The social security tax to be withheld is:	The Medicare tax to be withheld is:
$ 1.00	.	$ .06	$ .01	$ 51.00	.	$ 3.16	$ .74
2.00	.	.12	.03	52.00	.	3.22	.75
3.00	.	.19	.04	53.00	.	3.29	.77
4.00	.	.25	.06	54.00	.	3.35	.78
5.00	.	.31	.07	55.00	.	3.41	.80
6.00	.	.37	.09	56.00	.	3.47	.81
7.00	.	.43	.10	57.00	.	3.53	.83
8.00	.	.50	.12	58.00	.	3.60	.84
9.00	.	.56	.13	59.00	.	3.66	.86
10.00	.	.62	.15	60.00	.	3.72	.87
11.00	.	.68	.16	61.00	.	3.78	.88
12.00	.	.74	.17	62.00	.	3.84	.90
13.00	.	.81	.19	63.00	.	3.91	.91
14.00	.	.87	.20	64.00	.	3.97	.93
15.00	.	.93	.22	65.00	.	4.03	.94
16.00	.	.99	.23	66.00	.	4.09	.96
17.00	.	1.05	.25	67.00	.	4.15	.97
18.00	.	1.12	.26	68.00	.	4.22	.99
19.00	.	1.18	.28	69.00	.	4.28	1.00
20.00	.	1.24	.29	70.00	.	4.34	1.02
21.00	.	1.30	.30	71.00	.	4.40	1.03
22.00	.	1.36	.32	72.00	.	4.46	1.04
23.00	.	1.43	.33	73.00	.	4.53	1.06
24.00	.	1.49	.35	74.00	.	4.59	1.07
25.00	.	1.55	.36	75.00	.	4.65	1.09
26.00	.	1.61	.38	76.00	.	4.71	1.10
27.00	.	1.67	.39	77.00	.	4.77	1.12
28.00	.	1.74	.41	78.00	.	4.84	1.13
29.00	.	1.80	.42	79.00	.	4.90	1.15
30.00	.	1.86	.44	80.00	.	4.96	1.16
31.00	.	1.92	.45	81.00	.	5.02	1.17
32.00	.	1.98	.46	82.00	.	5.08	1.19
33.00	.	2.05	.48	83.00	.	5.15	1.20
34.00	.	2.11	.49	84.00	.	5.21	1.22
35.00	.	2.17	.51	85.00	.	5.27	1.23
36.00	.	2.23	.52	86.00	.	5.33	1.25
37.00	.	2.29	.54	87.00	.	5.39	1.26
38.00	.	2.36	.55	88.00	.	5.46	1.28
39.00	.	2.42	.57	89.00	.	5.52	1.29
40.00	.	2.48	.58	90.00	.	5.58	1.31
41.00	.	2.54	.59	91.00	.	5.64	1.32
42.00	.	2.60	.61	92.00	.	5.70	1.33
43.00	.	2.67	.62	93.00	.	5.77	1.35
44.00	.	2.73	.64	94.00	.	5.83	1.36
45.00	.	2.79	.65	95.00	.	5.89	1.38
46.00	.	2.85	.67	96.00	.	5.95	1.39
47.00	.	2.91	.68	97.00	.	6.01	1.41
48.00	.	2.98	.70	98.00	.	6.08	1.42
49.00	.	3.04	.71	99.00	.	6.14	1.44
50.00	.	3.10	.73	100.00	.	6.20	1.45
¹In addition to withholding Medicare tax at 1.45%, you must withhold a 0.9% Additional Medicare Tax from wages you pay to an employee in excess of $200,000 in a calendar year. You are required to begin withholding Additional Medicare Tax in the pay period in which you pay wages in excess of $200,000 to an employee and continue to withhold it each pay period until the end of the calendar year. Additional Medicare Tax is only imposed on the employee. There is no employer share of Additional Medicare Tax. All wages that are subject to Medicare tax are subject to Additional Medicare Tax withholding if paid in excess of the $200,000 withholding threshold.

If you make an error by withholding too little, you should withhold additional taxes from a later payment. If you withhold too much, you should repay the employee.

In addition to withholding Medicare tax at 1.45%, you must withhold a 0.9% Additional Medicare Tax from wages you pay to an employee in excess of $200,000 in a calendar year. You are required to begin withholding Additional Medicare Tax in the pay period in which you pay wages in excess of $200,000 to an employee and continue to withhold it each pay period until the end of the calendar year. Additional Medicare Tax is only imposed on the employee. There is no employer share of Additional Medicare Tax. All wages that are subject to Medicare tax are subject to Additional Medicare Tax withholding if paid in excess of the $200,000 withholding threshold.

taxmap/pubs/p926-002.htm#en_us_publink100086742

Example.(p7)

On February 13, 2013, Mary Brown hired Jane R. Oak (who is an unrelated individual over age 18) to care for her child and agreed to pay cash wages of $50 every Friday. Jane worked for the remainder of the year (a total of 46 weeks). Mary did not give Jane a Form W-4 to request federal or state tax withholding. The following is the information Mary will need to complete Schedule H, Form W-2, and Form W-3. See the completed examples of Form W-2 and Form W-3 for 2013 at the end of this publication.

Total cash wages paid to Jane		$2,300.00 ($50 x 46 weeks)

Jane's share of:
	Social security tax	$142.60 ($2,300 x 6.2% (.062))

	Medicare tax	$33.35
		($2,300 x 1.45% (.0145))
Mary's share of:
	Social security tax	$142.60 ($2,300 x 6.2% (.062))

	Medicare tax	$33.35 ($2,300 x 1.45% (.0145))
Amount reported on Form W-2 and Form W-3:
	Box 1: Wages, tips		$2,300.00
	Box 4: Social security tax withheld		142.60
	Box 6: Medicare tax withheld		33.35

For information on withholding and reporting federal income taxes, see Publication 15 (Circular E).

taxmap/pubs/p926-002.htm#en_us_publink100086743

If you prefer to pay your employee's social security and Medicare taxes from your own funds, do not withhold them from your employee's wages. The social security and Medicare taxes you pay to cover your employee's share must be included in the employee's wages for income tax purposes. However, they are not counted as social security and Medicare wages or as federal unemployment (FUTA) wages.

taxmap/pubs/p926-002.htm#en_us_publink100086744

Example.(p7)

In 2013 you hire a household employee (who is an unrelated individual over age 18) to care for your child and agree to pay cash wages of $100 every Friday. You expect to pay your employee $1,800 or more for the year. You decide to pay your employee's share of social security and Medicare taxes from your own funds. You pay your employee $100 every Friday without withholding any social security or Medicare taxes.

For social security and Medicare tax purposes, your employee's wages each payday are $100. For each wage payment, you will pay $15.30 when you pay the taxes. This is $7.65 ($6.20 for social security tax + $1.45 for Medicare tax) to cover your employee's share plus $7.65 ($6.20 for social security tax + $1.45 for Medicare tax) for your share. For income tax purposes, your employee's wages each payday are $107.65 ($100 + the $7.65 you will pay to cover your employee's share of social security and Medicare taxes).

taxmap/pubs/p926-002.htm#en_us_publink100086745

Unemployment Tax, Federal

The federal unemployment tax is part of the federal and state program under the Federal Unemployment Tax Act (FUTA) that pays unemployment compensation to workers who lose their jobs. Like most employers, you may owe both the federal unemployment tax (the FUTA tax) and a state unemployment tax. Or, you may owe only the FUTA tax or only the state unemployment tax. To find out whether you will owe state unemployment tax, contact your state's unemployment tax agency. For a list of state unemployment tax agencies, visit the U.S. Department of Labor's website at www.workforcesecurity.doleta.gov/unemploy/agencies.asp. You should also find out if you need to pay or collect other state employment taxes or carry workers' compensation insurance.

The FUTA tax is 6.0% of your employee's FUTA wages. However, you may be able to take a credit of up to 5.4% against the FUTA tax, resulting in a net tax rate of 0.6%. Your credit for 2013 is limited unless you pay all the required contributions for 2013 to your state unemployment fund by April 15, 2014. The credit you can take for any contributions for 2013 that you pay after April 15, 2014, is limited to 90% of the credit that would have been allowable if the contributions were paid by April 15, 2014. (If you did not pay all the required contributions for 2012 by April 15, 2013, see Credit for 2012, later.)

taxmap/pubs/p926-002.htm#en_us_publink1000251035

If a due date falls on a Saturday, Sunday, or legal holiday, payments are considered timely if made by the next business day. The term "legal holiday" means any legal holiday in the District of Columbia. Pay the tax as discussed under How Do You Make Tax Payments, later. Also, see What Forms Must You File, later.

taxmap/pubs/p926-002.htm#en_us_publink1000236749

The 5.4% credit is reduced for wages paid in a credit reduction state. See the Instructions for Schedule H (Form 1040).

Do not withhold the FUTA tax from your employee's wages. You must pay it from your own funds.

taxmap/pubs/p926-002.htm#en_us_publink100086747

Figure the FUTA tax on the FUTA wages you pay. If you pay cash wages to all of your household employees totaling $1,000 or more in any calendar quarter of 2012 or 2013, the first $7,000 of cash wages you pay to each household employee in 2013 is FUTA wages. (A calendar quarter is January through March, April through June, July through September, or October through December.) If your employee's cash wages reach $7,000 during the year, do not figure the FUTA tax on any wages you pay that employee during the rest of the year. For an explanation of cash wages, see the discussion on Social security and Medicare wages under Social Security and Medicare Taxes, earlier.

taxmap/pubs/p926-002.htm#en_us_publink100086748

Do not count wages you pay to any of the following individuals as FUTA wages.

Your spouse.
Your child who is under the age of 21.
Your parent.

taxmap/pubs/p926-002.htm#en_us_publink100086750

The credit you can take for any state unemployment fund contributions for 2012 that you pay after April 15, 2013, is limited to 90% of the credit that would have been allowable if the contributions were paid on or before April 15, 2013.

You must complete Worksheet A to figure the credit for late contributions if you paid any state contributions after the due date for filing
Form 1040.

taxmap/pubs/p926-002.htm#en_us_publink1000264781

Worksheet A. Worksheet for Credit for Late Contributions

1.	Enter the amount from Schedule H, line 20
2.	Enter the amount from Schedule H, line 17
3.	Subtract line 2 from line 1. If zero or less, enter -0-
4.	Enter total contributions paid to the state(s) after the Form 1040 due date
5.	Enter the smaller of line 3 or line 4
6.	Multiply line 5 by .90 (90%)
7.	Add lines 2 and 6
8.	Enter the smaller of the amount on line 1 or line 7 here and on Schedule H, line 21

Previous Page | Table of Contents | Top of Page | Index | Next Page Right Arrow

Do You Need To Pay Employment Taxes?(p3)

State employment taxes.(p3)

Social Security and Medicare Taxes(p3)

Social security and Medicare wages.(p5)

Withholding the employee's share.(p5)

Example.(p7)

Not withholding the employee's share.(p7)

Example.(p7)

Federal Unemployment (FUTA) Tax(p7)

Note.(p7)

Note.(p7)

FUTA wages.(p7)

Credit for 2012.(p7)