Household Employment Taxes

[Snow White]

Client is just now getting around to filing 2004 tax return. Actually, her kids have POA. They have a neighbor of the client who comes in to take care of her personal needs. Wanting to be as honest as possible, albeit very confused about all the paperwork, they set up as an employer with IRS and state. They have paid the state some worker's comp insurance but not the state unemployment tax. Total 2004 wages were $5550. Now I am doing schedule H. They have definately paid more than $1000 per quarter to this employee. So schedule H wants to collect 6.2% in total unemployment tax. Is this what should be happening? Does the IRS then send that on to the state? Or should we be filling out the state forms late, remitting to the state and then show that on Schedule H? Thanks for any help you can give.

[Lion]

Household Employer

Deal with her state separately. The feds make it fairly easy by putting everything on Schedule H for federal reporting and tax payment. In CT, you still have to file every form that any employer would file; just get to go to annual reports immediately instead of quarterly. Check with her state department of revenue for her requirements.

[Snow White]

State Credit

If taxpayer now files and pays state, can she still take a credit on schedule H for paying that? I think what I'm asking, is there a way around having to pay the 6.2% instead of .8% FUTA even if she has paid state their SUI after April 15, 2005. I am so used to corporation 940/941 along with states that something simple like schedule H comes along and all of a sudden I'm brain dead.

[WhiteOleander]

If I understand your question, the client will only pay the .08 if she has timely paid her state unemployment tax.

There is a place on the Sch H where you fill out that info. If they were paid correctly, your program should compute the correct amount.

[Brad Imsdahl]

State Credit

Unfortunately, the rules are very clear. Schedule H, Part II instructions say:

“Credit for Contributions Paid to State. You may be able to take a credit of up to 5.4% against the FUTA tax, resulting in a net tax rate of 0.8%. But to do so, you must pay all the required contributions for 2004 to your state unemployment fund by April 15, 2005. Fiscal year filers must pay all required contributions for 2004 by the due date of their federal income tax returns (not including extension). If you pay contributions to the State of New York, see the instructions for line 24.”

Note that you only get the credit if the state unemployment tax is paid by April 15th. If it hasn’t already been paid, they are too late.

[S T]

Schedule H

In part II of Schedule H, it has the FUTA questions for to see if the reduction of UI paid to the taxpayers State would apply. For 2004, the UI paid to the taxpayer's state would have had to be paid by 4/15/05. You have to answer yes to all questions in Part II to receive the credit.

Here is the Schedule H link http://www.irs.gov/pub/irs-pdf/i1040sh.pdf the FUTA topic starts on page H-4

Sandy

Sorry Brad, we were both posting at the same time.

[Snow White]

Thanks

Thanks Sandy and Brad. More posters the merrier. I too was sure the instructions were clear. Just hoping someone knew something more that might save client some money. Looks like they'll just have to grin and bear it. Happy 4th.