Small Business, Self-Employed, Other Business > Forms 940, 941 and 944 Employment Taxes

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Frequently Asked Tax Questions

Small Business, Self-Employed, Other Business - Forms 940, 941 and 944 Employment Taxes

We are about to hire employees and need to know how much tax to withhold and where to send this money?
We hired a nanny to look after our baby while we work. How do we pay her social security taxes and properly report her income?

Rev. date: 12/21/2012

Circular E, Employer's Tax Guide

You will need to:

Secure a completed Form W-4 (PDF), Employee's Withholding Allowance Certificate, from each employee.
Use Publication 15, (Circular E), Employer's Tax Guide, and Publication 15-A (PDF), Employer's Supplemental Tax Guide, to determine the amount of withholding and for directions on depositing the withheld amounts and other employment taxes. Also refer to Form 941 (PDF), Employer’s QUARTERLY Federal Tax Return, and the Instructions for Form 941, or Form 944 (PDF), Employer's ANNUAL Federal Tax Return, and the Instructions for Form 944.

Generally, employers are required to quarterly file Form 941, Employer's QUARTERLY Federal Tax Return, and annually file Form 940 (PDF), Employer's ANNUAL Federal Unemployment (FUTA) Tax Return. For more information about Form 940, see Topic 759. Employers also must annually file a Form W-2 (PDF), Wage and Tax Statement, for each employee, along with a Form W-3 (PDF), Transmittal of Wage and Tax Statements, and furnish copy of the Form W-2 to the employee.

Some small employers (those whose annual liability for social security, Medicare, and withheld federal income taxes is $1,000 or less) must annually file Form 944 (PDF), Employer's ANNUAL Federal Tax Return, instead of Forms 941, if the IRS has notified them to file Form 944 instead of Forms 941. Employers who are notified to file Form 944 but prefer to file Forms 941 may contact the IRS to request to file Forms 941 instead, and will receive written notification that their filing requirement has changed. (See the Instructions for Form 944). New employers are also eligible to file Form 944, if they will meet the eligibility requirements. If new employers qualify to file Form 944, they must check the box on line 14 of Form SS-4 (PDF), Application for Employer Identification Number, to indicate that they want to file Form 944 instead of Forms 941. If new employers do not check this box, they must file Forms 941.

Monthly or semiweekly deposits may be required for taxes reported on Form 941 (or Form 944), and quarterly deposits may be required for taxes reported on Form 940. The employer should consult each form’s instructions to determine when deposits and payments must be made.

The Employment Tax e-file System offers an improved way to file Forms 940, 941, and 944 electronically. Prospective participants must first complete and submit an IRS e-file application. You can complete the IRS e-file application online after registering for e-services. For more information, visit the Employment Tax e-file System page on www.irs.gov.

Additional Information

Participation in IRS e-file

Rev. date: 01/09/2013

A nanny is considered a household employee, and you are a household employer:

A household employer only withholds and pays social security and Medicare taxes if cash wages paid to an employee exceed the threshold amount for the year.
If the amount paid is less than the threshold, no social security or Medicare taxes are owed.
You must withhold the employee's share of social security and Medicare taxes unless you choose to pay both the employee's share and the employer’s share. The taxes are 15.3% of cash wages. Your share is 7.65% and the employee's share is 7.65%.
You may also be responsible for paying federal unemployment tax. Federal unemployment tax is not withheld from your employee’s wages. You are not required to withhold income tax from your employee’s wages. However, you and your employee may agree for you to withhold income tax from their wages.
If social security and Medicare taxes or federal unemployment taxes must be paid, or if you withhold income tax, you will need to file Schedule H (Form 1040) (PDF), Household Employment Taxes. You may also need to file a Form W-2 (PDF), Wage and Tax Statement and furnish a copy of the form to your employee.
If you choose to pay your household employment taxes with your business or farm employment taxes, you must report your household employment taxes with those other employment taxes on Form 941 (PDF), Employer’s QUARTERLY Federal Tax Return, Form 944 (PDF), Employer’s ANNUAL Federal Tax Return, or Form 943 (PDF), Employer’s Annual Federal Tax Return for Agricultural Employees, and on Form 940 (PDF), Employer’s Annual Federal Unemployment (FUTA) Tax Return.

Additional Information

Tax Topic 756, Employment Taxes for Household Employees Publication 926, Household Employer's Tax Guide

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

Frequently Asked Tax Questions

Small Business, Self-Employed, Other Business - Forms 940, 941 and 944 Employment Taxes

We are about to hire employees and need to know how much tax to withhold and where to send this money?

We hired a nanny to look after our baby while we work. How do we pay her social security taxes and properly report her income?