Household employees less than $2000.

[oceanlovin'ea]

My mother now requires 24/7 care in her home. We have hired several people to stay with her for the past 7 months. I knew that as household employees I am required to withhold payroll taxes and give them a W-2. The fact that if they didn't earn $2000 during the year no payroll taxes are reported.

4 of the 7 people earned less than $2000 last year. One only worked a couple of months and the other 3 started near the end of the year. I withheld payroll taxes on all of them. Now what I am reading is that I don't have to pay the payroll taxes on their earnings.
Here are my questions:
Do I still issue them a W-2 but show nothing in boxes3,4,5,and 6?
If so, what do I do about the money that I withheld from their checks but now don't have to remit to IRS?
One earned 1315.00. Another earned 1916.90. another earned 1507.49. The last one earned $200.00.
#1 worked 2 months in the third quarter. #2 and #3 worked during 4th quarter. #4 worked the last 2 weeks of the year. So 3 of them earned more than $1000 during a quarter.

Thanks for you help.

Linda, EA

[TaxGuyBill]

If you choose to file the W-2s (they are not required unless there was withholding), I would think you would enter zeros, and refund the Social Security and Medicare tax withholding to the employees.

[oceanlovin'ea]

another thought

If I didn't report the wages on the W-2, they would be required to report them on their tax return anyway. Probably on Schedule C. But they aren't self-employed. So I would think I have to prepare the W-2.

The other thought was that they were paid over $1000 during a quarter so I have to pay federal unemployment tax on their wages. That is part of the Schedule H.

Linda, EA

[Kram BergGold]

Clarification

When a HH worker earns less than $2,000 and there is no W-2, they report the income on line 7 as wages.

[FEDUKE404]

Reporting household wages on Form 1040

When a HH worker earns less than $2,000 and there is no W-2, they report the income on line 7 as wages.

CORRECT!!

And if the information has been entered properly in the tax software, for $1,234 of such wages the annotation "HSH 1234" should be automatically generated and printed on line 7 of Form 1040.

FE

[oceanlovin'ea]

no W-2

Does this mean that I should not give them a W-2? I had told all of them that I would. Most of them might not understand what to do if I don't give them one?

What do I do with the money that I took out of their checks during the year?

Linda, EA

[Kram BergGold]

Return the $

I would write a letter to them explaining why they are not getting a W-2 when I returned the money to them. I would also explain to them how to report the money on their tax return as detailed by FE.

[mastertaxguy]

Is this really the worker's Trade or Business?

My mother now requires 24/7 care in her home. We have hired several people to stay with her for the past 7 months. I knew that as household employees I am required to withhold payroll taxes and give them a W-2. The fact that if they didn't earn $2000 during the year no payroll taxes are reported.

4 of the 7 people earned less than $2000 last year. One only worked a couple of months and the other 3 started near the end of the year. I withheld payroll taxes on all of them. Now what I am reading is that I don't have to pay the payroll taxes on their earnings.
Here are my questions:
Do I still issue them a W-2 but show nothing in boxes3,4,5,and 6?
If so, what do I do about the money that I withheld from their checks but now don't have to remit to IRS?
One earned 1315.00. Another earned 1916.90. another earned 1507.49. The last one earned $200.00.
#1 worked 2 months in the third quarter. #2 and #3 worked during 4th quarter. #4 worked the last 2 weeks of the year. So 3 of them earned more than $1000 during a quarter.

Thanks for you help.

Linda, EA

Are these service providers really employees of you or your mother, or both?

You state you withheld payroll taxes from whatever you paid them so you have to deal with it. Curious that you or 'we' are paying service providers and you or we withheld "employee" share of federal payroll taxes. You probably had W-4 forms from all of them, and if so, you made the omelette and you get to now serve it. Including worker's comp riders on whichever house in which the services are being provided.

However....

Your facts say "we" hired 7 people over a 7 month period of time, 3 of whom were paid more than $2000.00. 24 hours a day x 210 days (7 months roughly) is 5040 hours. Your figures suggest total compensation (whatever form) of $40,000+ (at Florida minimum wage).

[My suspicion is that your 7 workers only were around only when you and/or other family members were not available or wanted a break. But again, you are not stating that "mom"hired these workers. Perhaps you did this pursuant some sort of POA or advance directive or court order....in any event....]

If these services were in fact the individual service provider's trade or business, file whatever paperwork you want in the name of whomever is the payor, probably W-2 since you state you did payroll tax withholding.

If not their trade or business, and if you feel compelled to issue some sort of document, give them a 1099-MISC using box 3 under the name of whomever is the payor, report the amount of withholding if any OR return what you withheld to them.

[oceanlovin'ea]

explanation

My mother is 95 years old. She has macular degeneration and can hardly see anything. She fell in March and broke her hip. When she was released to go home, the doctor said she could no longer live alone and must have 24/7 care. There is only my brother and I to care for her. She wants to stay in her own home rather than go to a nursing home. So as long as it is feasible to take care of her that way we will do so.
She doesn't like the caregiver agencies. We tried them. She complains about how much they charge and really didn't like the people they sent. We have found people that we know and that were recommended to us to stay with her. As caregivers, they are considered household employees. They help her do the things she is not able to do, including dressing, bathing, cooking her meals, etc.

You are required to pay payroll taxes on the wages of household employees. One person only worked for 2 months and left. Three others started toward the end of the year so did not work long enough to earn $2000. I wasn't aware of the $2000 ceiling on paying wages. I should have read the Schedule H instructions earlier. Although I couldn't foresee people leaving when they started working.
This is NOT 1099 misc income for them. They are employees. I make out a schedule and tell them when to come to work and we tell them what to do.
It is her money that pays them. But you can't expect a 95 year old person to handle all the details of this care so I have to do that. I do have POA for her, if that is of any importance.

So as last question asked: What do I do with the money that I withheld from their checks if I am not required to report it and pay it? Do I give it back to them? I withheld FIT on 3 of them. Do I just give that money back to them too? or Do I remit the FIT money with the schedule H and give them W-2's with Box 1 and 2 filled in so that they can get credit for the FIT?

Did not expect this to be so complicated!!

[mastertaxguy]

Worker or self employed?

While it is admirable that you obtained W-9 forms for all the workers, obtained workers comp (insuring whomever is the employer here), I-9 forms, did background checks, provided all necessary supplies (gloves, masks, gowns, etc) and are ready to file FUTA/SUTA and all other forms required in whatever state you are in while loving the ocean, IRS Letter Ruling 201633034 suggests that such workers may, or may not be, employees. They may be independent contractors. Facts and circumstances (what a surprise, eh?)

But again, you can do what you are most comfortable with and want to do.

Were this situation on my desk absent someone providing services more than 24 hours a week I would advise that the service providers are independent contractors. If more than 24 hours a week, I would take a longer look. Like to see if there is some sort of written agreement or memorandum of understanding. If this situation was on my desk from one of the caregivers, my analysis likely would be the same. Worker's comp and unemployment attorneys might have a different view but I am not one of them.

Clearly, this issue has caused you a fair amount of concern so far. So do what you want or feel obligated to do. It appears that you are not in the business of providing caregivers.

From IRS pub 926:

"Workers who aren't your employees. If only the worker can control how the work is done, the worker isn't your employee but is self-employed. A self-employed worker usually provides his or her own tools and offers services to the general public in an independent business.
A worker who performs child care services for you in his or her home generally isn't your employee.
If an agency provides the worker and controls what work is done and how it is done, the worker isn't your employee.
Example. You made an agreement with John Peters to care for your lawn. John runs a lawn care business and offers his services to the general public. He provides his own tools and supplies, and he hires and pays any helpers he needs. Neither John nor his helpers are your household employees."

Your posts on this forum have always reflected your competence on a wide variety of tax issues; I for one am confident you can figure out what you are comfortable to do in this situation, prepare to sustain your position whatever it is, do it and concentrate on Mom. The fact that some like me believe you are creating more work than is necessary is not relevant.

[TaxGuyBill]

So as last question asked: What do I do with the money that I withheld from their checks if I am not required to report it and pay it? Do I give it back to them? I withheld FIT on 3 of them. Do I just give that money back to them too? or Do I remit the FIT money with the schedule H and give them W-2's with Box 1 and 2 filled in so that they can get credit for the FIT?

Remit FIT with Schedule H, and only fill out boxes 1 and 2 of the W-2. Refund the employees for Social Security and Medicare.

[Burke]

So as last question asked: What do I do with the money that I withheld from their checks if I am not required to report it and pay it? Do I give it back to them? I withheld FIT on 3 of them. Do I just give that money back to them too? or Do I remit the FIT money with the schedule H and give them W-2's with Box 1 and 2 filled in so that they can get credit for the FIT? Did not expect this to be so complicated!!

Publ 926 covers this on page 6. It has most anything else you might need to know re: household employees and taxes. TaxGuyBill's response has it right. Refund the FICA to employee, give them a W-2 completing only Boxes 1 & 2, and report any FIT on Schedule H.

PS: You are not required to withhold income tax on household employees, but may agree to do so. Make your life a little easier and just deal with the FICA.

[oceanlovin'ea]

Thank you Burke and TaxGuyBill for your references. Pub 926 was a great help.

Linda, EA

[Burke]

Yes, but it does not cover state issues. Don't forget FUTA (federal) and SUTA (state unemployment forms & payments). Looks like it is RT-6 in Florida but you may ask for annual reporting via RT-7a.

[Kram BergGold]

Whoa!

See page 14=3 in TTB. I looked it up there and in Pub 926. No where does it say you prepare W-2 forms to HH employees earning under $2,000. I stand by my previous answer.