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Old 06-24-2012, 12:42 PM
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Join Date: Jun 2012
Posts: 1
Household workers - 3 scenarios

Hi all,

I'm new to this group - thanks in advance for any thoughts or feedback.

In 2012, I will employ three different household employees in the state of Illinois and I'm trying to figure out: 1) how I report this on my individual tax return; 2) what taxes I need to pay / withhold; 3) what forms I need to give the employee.

#1 is straightforward - I think - in that I use Schedule H to report for all three employees. I'm hoping that my tax software program will walk me through this next year when I file.

#2 and #3 are more complex. Here are the 3 scenarios that I am facing, and where I am landing after having read IRS Publication 926 and Illinois Publication 121.

Employee 1: Nanny paid more than $1800 in 2012
--> What taxes are paid / withheld
- have to pay FICA - 7.65% for employer, 5.65% for employee
- have to pay FUTA (this is paid on our individual income tax)
- have to pay IL state unemployment tax quarterly
--> What form employee gets
- have to give W-2 form, copies B, C, and 2 to employee by Jan 31 and send Copy A and W-3 to SSA by Apr 2 if submitting electronically
- can withhold income tax if they want - get W-4 if so

Employee 2: Nanny paid less than $1800 in 2012 but more than $1000 in one quarter
--> What taxes are paid / withheld
- do not have to pay FICA
- have to pay FUTA (again, paid on our individual income tax)
- have to pay IL state unemployment tax quarterly
--> What form employee gets
- do not have to give W-2 form to employee (see pub 926, page 9)
QUESTION - does the employee get any form? i.e., does she have to report this income?

Employee 3: Household cleaner paid more than $600 but less than $1800 in 2012 and less than $1000 in quarter
--> What taxes are paid / withheld
- do not have to pay FICA
- do not have to FUTA
- do not have to pay IL state unemployment quarterly
--> What form employee gets
- do not have to give W-2



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Old 06-24-2012, 07:07 PM
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Join Date: Oct 2010
Posts: 4,854
“#1 is straightforward - I think - in that I use Schedule H to report for all three employees. I'm hoping that my tax software program will walk me through this next year when I file.”--->As an ER, UNLESS your nannies are independent contractors(the IRS has clearly ruled that the majority of jobs within the home, including nanny positions, are classified as employment), you need to complete Sch H for figuring your household employment taxes; Form W-2 for reporting wages paid to your EEs(You must file Form W-2 for each household employee to whom you paid $1,800 or more of cash wages in 2012 that are subject to FICA Taxes). The only legally required withholdings are FICA taxes(You must withhold the EEs’ share of FICA taxes unless you choose to pay both the employee's share and the employer’s share. The taxes are 13.3% of cash wages. Your share is 7.65% and the EEs’ share is 5.65%.) and FUTA taxes. Form 940 (as long as you paid your nanny $1,000 or more in any quarter. Wages that exceed the $7,000 threshold aren't taxable for FUTA purposes, so take care not to overpay those taxes. FUTA tax is not withheld from your EEs’ wages) ; Form W-3 for sending Copies A of Forms W-2 to the Social Security Administration. You should send one copy of Form W-3 with Copy A of Form(s) W-2 to the SSA, and keep one copy of Form W-3 for your records. You need to file Sch H with your Form 1040. Should you fail to collect, you remain responsible to remit these taxes for the employee.If you have household employees, you will need an EIN to file Sch H. Employers of solely Household employees don't usually file form 941.If you employed a household EE in 2012, you probably have to pay contributions to IL unemployment fund for 2012. To find out if you do, contact your state unemployment tax agency. You are not required to withhold federal income tax from wages you pay a household EE. You should withhold federal income tax only if your household EE asks you to withhold it and you agree. THen, your EE needs to submit you W4.

#2 and #3 are more complex. Here are the 3 scenarios that I am facing, and where I am landing after having read IRS Publication 926 and Illinois Publication 121.

Employee 1: Nanny paid more than $1800 in 2012
“--> What taxes are paid / withheld”--->As described above; you, as an ER, need to pay FICA taxes, or possibly FUTA tax and may have to withhold your EEs’ fed/Il taxes.
“- have to pay FICA - 7.65% for employer, 5.65% for employee”---->Correct. 13.3%; unemployment tax rate/ the self-employment tax rate for self-employment income earned in calendar year 2011/2012 is 13.3% (10.4% for Social Security and 2.9% for Medicare). 7.65% for ER, 5.65% for EE.
“- have to pay FUTA (this is paid on our individual income tax)”---->It depends; as long as you paid your nanny(each of them) $1,000 or more in any quarter.
“- have to pay IL state unemployment tax quarterly”--->It depends on your EEs’ gross income that yu pay; you can contact IL Dept of Revenue for sure.
“--> What form employee gets”--->copies of W2 or W4 as long as you withhold federal tax or IL form as long as you withhold IL taxes from your EEs’ paychecks.
“- have to give W-2 form, copies B, C, and 2 to employee by Jan 31 and send Copy A and W-3 to SSA by Apr 2 if submitting electronically “--->In general yes. Each year, ERs must send Copy A of Form W-2 to SSA by the last day of February (or last day of March if you file electronically) to report the wages and taxes of EEs for the previous calendar year. So, you send another copy of the W-2 to the SSA which later sends a federal copy (no state information) to the IRS. That usually gets posted in May or June. You send the government copy of Form W-2 to the SSA. The SSA uses the information to update your EEs’ lifetime earnings record and then transmits the data to the IRS, typically starting in June or July. The IRS typically has most data in their systems by the end of the Summer. In addition, you must give a W-2 to each EE by January 31 (for individual income tax purposes.) W-2s are sent to SSA along with a Form W-3. If you e-file, you need to type in the information from the W-2. If you file by mail, you send a copy.
“- can withhold income tax if they want - get W-4 if so”--->Correct; if yourEEs are employed, they can file a new W-4 form with you to request more taxes be withheld from their paycheck to cover their fed tax. Withholding federal income tax from your EEs/paychecks is optional and something you should discuss with them. If together you decide to do this,they will need to fill out form W-4 requesting the appropriate amount of withholding. You should then add these taxes to the amount you are withholding for FICA and FUTA. Additionally, you will need to file a W-2 for your EEs each year you have withheld federal incomes taxes.You do not need to file quarterly form941 with the IRS.
Employee 2: Nanny paid less than $1800 in 2012 but more than $1000 in one quarter
“--> What taxes are paid / withheld”--->Then, you do not need to pay FICA taxes for the nanny ,however, you STILL need to file Form940 since the nanny was paid more than $1000 in one quarter. The nanny tax comprises two federal taxes, FICA and FUTA; FUTA is owed for only the first $7,000 you pay your nanny each year. This tax is normally only 0.8 percent. However, if you fail to pay your state unemployment tax on time, the FUTA rate increases to 6.2 percent. You do not have to pay taxes on your nanny's salary if the nanny made less than $1,800 in 2012. In addition, you do not have to pay taxes on babysitters under the age of 18 if they are not full-time nannies or have another principal occupation such as being a student.
“- do not have to pay FICA”--->No.
“- have to pay FUTA (again, paid on our individual income tax)”-->yes
“- have to pay IL state unemployment tax quarterly”--->It depend on your EEs’ gross income. As long as the nanny requests you to withhold IL taxes. States allow nanny taxes to be withheld. These taxes are for state unemployment and in some states workers compensation insurance. The percent and forms required differ from state and failure to withhold the appropriate taxes can result in hefty penalties. Check with your state Dept of Revenue.
“--> What form employee gets”--->No w2/w4.
“- do not have to give W-2 form to employee (see pub 926, page 9)”--->Correct; the EE files Form 1040 with Sch C and SE to report the income and pay the self-employment tax. You are not required to provide the EE with any documentation of the income. You are not required to withhold any FICA taxes. FICA taxes are waived on household employee wages of less than $1,800 per year in 2012. So, you are not required to provide a W2 to the EE;
“QUESTION - does the employee get any form? i.e., does she have to report this income?”--->No W2/W4 form ;however, the EE might need to file 1040/Sch C/SCh SE as long as the amount on Sch SE line 4(line 29/31 on Sch C) is $400 or exceeds $400. The EE also may have to file IL return with IL return form(s) by paying quarterly estimated federal/IL taxes.
Employee 3: Household cleaner paid more than $600 but less than $1800 in 2012 and less than $1000 in quarter


Last edited by Wnhough : 06-24-2012 at 07:19 PM.


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