Breaking Down the Schedule H Form
Are you familiar with the Schedule H form? You may have had no use for this form in the past, but it doesn’t mean this will remain true in the future.
Also known as Schedule H (Form 1040), Household Employment Taxes, this is to be used in the following circumstances:
- If you paid a household employee cash wages of $2,100 or more during a calendar year.
- If you withheld federal income tax for a household employee during a calendar year.
- If you paid total cash wages of $1,000 or more in any calendar quarter of the current or previous year to all household employees.
With this information in mind, here is a question you need to answer: is the person working in your home actually considered an employee? The IRS defines a household employee as follows:
"If you hired someone to do household work and you could control what work he or she did and how he or she did it, you had a household employee. This is true even if you gave the employee freedom of action. What matters is that you had the right to control the details of how the work was done."
Types of Household Employees
Many people struggle to determine if they must file Schedule H, as they don't fully understand who is considered a household employee. In short, this is anybody you pay to provide services in your household, including but not limited to:
- Private nurse or health aide
- Housekeeper or maid
- Gardener or landscaper
- Personal chauffeur
- Personal assistant or personal chef
When and Where to File Schedule H
Once you come to the conclusion that you have to file Schedule H, it is important to become familiar with the finer details of when, where and how to move forward.
Fortunately, the IRS has made this simple. If you file Form 1040, all you have to do is attach Schedule H at the same time. As long as you do so by the tax deadline - which is April 15th for your 2019 tax return - you have nothing to worry about in terms of the timeline. If you hire a payroll service, they should provide a signature-ready Schedule H for you.
Exceptions: if you receive an extension to file your tax return, you can also hold off on filing Schedule H. In the event that you are a fiscal year filer, you will want to remit your return, along with Schedule H, by the due date of your fiscal year return.
Schedule H Records
If you have a household employee and are required to file Schedule H, there are some things you need to know from a recordkeeping perspective.
- Keep copies of Schedule H for a minimum of four years from the filing due date.
- Each payday, record and keep amounts and dates for the following: noncash and cash wage payments; Social Security tax withheld; Medicare tax withheld; and federal income tax withheld.
While some IRS forms are confusing, Schedule H is relatively straightforward and simple to understand once you know what is being asked of you.
Once you've reviewed the Schedule H instructions, if you have any questions or concerns, you will want to consult with a tax professional.