38.2 Social Security and Medicare (FICA) Taxes for Household Employees

Income tax withholding is not required for a household employee (38.3), but generally you must withhold Social Security and Medicare (FICA) taxes from the employee’s cash wages and also pay the employer share of FICA yourself, unless the wages are below an annual threshold, which for 2012 is $1,800. You report and pay the FICA taxes on Schedule H, which you must attach to your Form 1040; see 38.3. If you pay the household employee cash wages of less than $1,800, the wages are not subject to FICA taxes.

Caution

W-2 Distribution Deadline

Even if you request an extension to file copies of Form W-2 with the Social Security Administration, you must still furnish Form W-2 for 2012 to each employee by January 31, 2013.

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Once payments to a non-exempt employee (38.1) equal or exceed $1,800 in 2012, the entire amount, including the first $1,800, is subject to FICA taxes. The $1,800 threshold may be increased for 2013 by an inflation adjustment.

Tax rates.

If in 2012 you pay your household employee cash wages of $1,800 or more, you are liable for (1) Social Security taxes at the rate of 10.4% (6.2% for you and 4.2% for your employee) on wages up to the annual Social Security wage base, which for 2012 is $110,100, and (2) Medicare taxes at a rate of 2.9% (1.45% for each of you) on all wages with no limit.

You are responsible for paying your employee’s share of Social Security and Medicare taxes as well as your own share. You must either withhold your employee’s share from his or her wages or pay it from your own funds. On Schedule H, you are liable for the total tax, both your share and the employee’s share (38.3).

If you pay the employee’s share of FICA taxes from your own funds instead of deducting it from wages, you must treat your payments as additional wages when you report the employee’s wages on his or her Form W-2, but the payment is not considered wages for purposes of figuring your FICA or FUTA liability on Schedule H; see the Example in 38.3.

Estimated taxes.

To cover the household employment taxes that you owe, you may need to increase the federal income tax withheld from your pay or pay estimated taxes to avoid an estimated tax penalty (27.1).

Reporting options for self-employed persons who have regular business employees as well as household employees.

Self-employed persons who have business employees in addition to household employees may use one of the following reporting options:

Small employers whose annual liability for Social Security, Medicare, and withheld federal income tax is $1,000 or less may be notified by the IRS that they must file Form 944 to report and pay the taxes only once a year, instead of quarterly on Form 941. If you are a new employer filing Form SS-4 to get an EIN (38.3) and expect to have $1,000 or less of employment tax liability, you may tell the IRS on the Form SS-4 that you would like to file Form 944. You may also make a request to use Form 944 if you have used Form 941 but expect to have employment tax liability of $1,000 or less for the upcoming calendar year; you must make the request by the deadline specified in the Form 944 instructions. If you receive a notification from the IRS that you must file Form 944, you may request a change to Form 941 filing; see the Form 944 instructions.

Employers of household employees must also give copies of Form W-2 (Wage and Tax Statement) to each employee and to the Social Security Administration, as discussed in 38.3.