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    Nanny Tax

    Just attended a webinar about Nanny Tax, the speaker mentioned for elder care, many people hire household employee did not realize not only the employer has to issue w-2(>2000 per year) and schedule H, FUTA, SUTA AND WORKER'S COMP are also needed. Is that true?
    I have a client, his wife is very sick, this year he hired a helper and paid over 2000. I did not know other than w2 and schedule H, he also has to pay FUTA, SUTA and worker's comp. Can you take care all that in Jan 2018?Never had to deal with this before.

    #2
    FUTA is part of Schedule H.

    SUTA and Worker's Compensation are State requirements, so you would need to confirm that your State requires those for Household Employees (I think most do) and if the State rules for SUTA payments/filings are different for Household Employees than 'regular' employees.

    Worker's Compensation is insurance, so that has nothing to do with taxes. I would assume that should be done ASAP, or the employee is not covered.

    Comment


      #3
      Schedule H entries

      You indeed need to file a Schedule H with your tax return, as well as prepare/issue/file a W2 for the household employee if the $2k wage threshold is broken.

      The Schedule H has several yes/no questions at the top to point you in the right direction.

      You calculate applicable Soc Sec / Medicare / FUTA taxes and "pay" them as an additional tax on your Form 1040. (If there is no Form 1040 required, the Schedule H can also function as a stand-alone form for filing.)

      Remember that if you did not withhold the employee's portion of Soc Sec / Medicare taxes, the taxable income of the employee (as shown on the W2) is increased by those amounts.

      State requirements for SUTA etc vary, so you will need to do your own homework there. You likely will first need to establish an account for any state SUTA payments that are subsequently reported in Part II of the Schedule H.

      It is worth noting that failure to pay the proper amounts, in a timely manner, can create major problems to include significant penalties. .. often from the state. A frequent sequence is caregiver Jane files for unemployment after working for Mr Jones. . .but the state has no record of any such employment/SUTA/etc. A similar scenario can exist if Jane incurs an injury while working for Mr. Jones, and files for Workmen's Comp. Mr. Jones will likely receive a very unpleasant notice re unpaid back taxes and associated penalties.

      FE

      Comment


        #4
        Originally posted by FEDUKE404 View Post
        Remember that if you did not withhold the employee's portion of Soc Sec / Medicare taxes, the taxable income of the employee (as shown on the W2) is increased by those amounts.
        If the employer wants to, they can still have the option to take the 'missed' Social Security/Medicare withholding from the next paychecks.

        https://www.irs.gov/publications/p15...link1000202531


        If the employer decides to pay the employee-portion of Social Security/Medicare taxes, Household Employees (and Agricultural Employees) have the unusual rule that amount would be added to Box 1 of the W-2, but not Boxes 3 or 5 (other 'regular' employees need to add it to all three Boxes, which sort-of requires a calculation).

        https://www.irs.gov/publications/p15...link1000169619

        Comment


          #5
          Your question....

          "Can you take care all that in Jan 2018?Never had to deal with this before."

          Think you should look to see what 2017 taxes you mentioned were required to be filed quarterly/annually and file those returns based on the due dates (even if late past due).
          Last edited by TAXNJ; 11-16-2017, 10:38 PM.
          Always cite your source for support to defend your opinion

          Comment


            #6
            Originally posted by TaxGuyBill View Post
            If the employer decides to pay the employee-portion of Social Security/Medicare taxes, Household Employees (and Agricultural Employees) have the unusual rule that amount would be added to Box 1 of the W-2, but not Boxes 3 or 5 (other 'regular' employees need to add it to all three Boxes, which sort-of requires a calculation).
            Thank you for bringing this point up. While the federal rule is probably there to avoid having to do gross-up calculations, your state may not follow that rule. See TheTaxBook topic "Gross-Up Computation" for the calculation details. Much simpler to do withholding from every paycheck.

            For state purposes, any meals/lodging provided for employer's convenience, while maybe not subject to income tax, could still be subject to SUTA or other payroll taxes.

            Some people just pay a service to handle all the payroll for them, including providing required paystubs to the employee, W-2 filings, Schedule H preparation, and making estimated tax payments to cover Schedule H taxes, along with state filings and payments.

            Comment


              #7
              If the new tax plan, as being discussed, takes away the medical deduction, it will hurt many disabled individuals that use a household employee for their care.

              Comment


                #8
                Bidding adieu to medical deductions

                Originally posted by Sparky View Post
                If the new tax plan, as being discussed, takes away the medical deduction, it will hurt many disabled individuals that use a household employee for their care.
                OR who have a relative in an assisted living facility.

                Rest assured that many taxpayers, with no "wage" income to benefit from all of the highly touted tax breaks on the horizon, pay far more for such medical expenses than many/most folks incur for their total "SALT" deductions. It gets even worse for many senior citizens who have paid off their mortgages and thus will soon likely fall into the standard deduction category.

                Maybe someone in The Swamp is listening. . . . .

                FE

                Comment


                  #9
                  Originally posted by TaxGuyBill View Post
                  If the employer decides to pay the employee-portion of Social Security/Medicare taxes, Household Employees (and Agricultural Employees) have the unusual rule that amount would be added to Box 1 of the W-2, but not Boxes 3 or 5. https://www.irs.gov/publications/p15...link1000169619

                  If this is done, how does the employee get credit for social security earnings on their record?

                  Comment


                    #10
                    Earnings reported on W2

                    Originally posted by Burke View Post
                    If this is done, how does the employee get credit for social security earnings on their record?
                    FICA/Medicare wages are properly reported in boxes 3 and 5 of the W2. That is where the questioned "credit" issue applies.
                    The additional compensation, reported in box 1 only, is NOT deemed to be "earnings." The employee is responsible for the income tax on that higher income, however.

                    FE

                    Comment


                      #11
                      As FEDUKE says, the normal wages still go in Boxes 3 and 5, but the EmployEE portion of FICA that the EmployER decides to pay only goes in Box 1. For 'normal' employees, if the employer pays the employees portion of FICA, Boxes 3 and 5 are also increased by that 'extra' amount paid.

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