Instructions For Schedule H (Form 1040) 2003 (Page 5 of 8) in pdf

1. You will not have Federal income tax withheld from wages,

employees’ wages on your Form 940 (or Form 940-EZ),

pensions, or any other payments you receive.

Employer’s Annual Federal Unemployment (FUTA) Tax Return.

2. Your income taxes, excluding your household employment

taxes, would not be enough to require payment of estimated taxes.

State Disability Payments

Certain state disability plan payments to household employees are

What Records To Keep

treated as wages subject to social security and Medicare taxes. If

your employee received payments from a plan that withheld the

You must keep copies of Schedule H and related Forms W-2, W-3,

employee’s share of social security and Medicare taxes, include the

W-4, and W-5, Earned Income Credit Advance Payment Certifi-

payments on lines 1 and 3 and complete the rest of Part I through

cate, for at least 4 years after the due date for filing Schedule H or

line 5. Add lines 2, 4, and 5. From that total, subtract the amount of

the date the taxes were paid, whichever is later. If you have to file

these taxes withheld by the state. Enter the result on line 6. Also,

Form W-2, also keep a record of each employee’s name and social

enter “disability” and the amount subtracted on the dotted line next

security number. Each payday, you should record the dates and

to line 6. See the notice issued by the state for more details.

amounts of:

•

Cash and noncash wage payments.

•

How to Get Forms and Publications

Any employee social security tax withheld.

•

Any employee Medicare tax withheld.

To get the IRS forms and publications mentioned in these instruc-

•

Any Federal income tax withheld.

tions (including Notice 797), call 1-800-TAX-FORM

•

Any advance EIC payments you made.

(1-800-829-3676) or use one of the other sources listed in your

income tax return instructions.

What Is the Earned Income Credit

Completed Example of Schedule H,

(EIC)?

Form W-2, and Form W-3

The EIC is a refundable tax credit for certain workers.

You must notify

Which Employees Must I Notify About the EIC?

On February 14, 2003, Susan Green hired Helen Maple to clean her

your household employee about the EIC if you agreed to withhold

house every Wednesday. Susan did not have a household employee

Federal income tax from the employee’s wages but did not do so

in 2002.

because the income tax withholding tables showed that no tax

should be withheld.

Susan paid Helen $50 every Wednesday for her day’s work.

You are encouraged to notify each employee whose wages

Note:

Susan decided not to withhold Helen’s share of the social security

for 2003 were less than $33,692 ($34,692 if married filing jointly)

and Medicare taxes from the wages she paid Helen. Instead, she

that he or she may be eligible for the EIC.

will pay Helen’s share of these taxes from her own funds. Susan did

not withhold Federal income tax because Helen did not give her a

You must give the

How and When Must I Notify My Employees?

Form W-4 to request withholding and no withholding is otherwise

employee one of the following:

•

required. Susan also did not pay Helen advance earned income

The official IRS Form W-2, that has the required information

credit payments because Helen did not give her a Form W-5.

about the EIC on the back of Copy B.

•

A substitute Form W-2 with the same EIC information on the

Helen was employed by Susan for the rest of the year (a total of

back of the employee’s copy that is on Copy B of the official IRS

46 weeks). The following is some of the information Susan will

Form W-2.

need to complete Schedule H, Form W-2, and Form W-3.

•

Notice 797, Possible Federal Tax Refund Due to the Earned

Income Credit (EIC).

•

Helen’s total cash wages . . . . .

$2,300.00

Your written statement with the same wording as Notice 797.

($50 x 46 weeks)

If you are not required to give the employee a Form W-2, you

Helen’s share of the —

must provide the notification by February 9, 2004.

Social Security tax . . . . . .

$142.60

You must hand the notice directly to the employee or send it by

($2,300 x 6.2% (.062))

First-Class Mail to the employee’s last known address.

Medicare tax . . . . . . . . . .

$33.35

Eligible employees claim

How Do My Employees Claim the EIC?

($2,300 x 1.45% (.0145))

the EIC on their 2003 tax returns.

Helen’s total cash wages each quarter:

How Do My Employees Get Advance EIC Payments?

Eligible

1st quarter . . . . . . . . . . .

$300.00 ($50 x 6 weeks)

employees who have a qualifying child can get part of the credit

2nd quarter . . . . . . . . . .

$650.00 ($50 x 13 weeks)

with their pay during the year by giving you a completed Form

3rd quarter . . . . . . . . . . .

$650.00 ($50 x 13 weeks)

W-5. You must include advance EIC payments with wages paid to

these employees. For details, including tables that show you how to

4th quarter . . . . . . . . . . .

$700.00 ($50 x 14 weeks)

figure the amount to add to the employee’s net pay, see Circular E

Amount included in box 1 of Form W-2 and Form W-3:

(Pub. 15), Employer’s Tax Guide.

Cash wages . . . . . . . . . . . . . . . . . . . . . . . . . $2,300.00

Helen’s share of social security tax paid by

Rules For Business Employers

Susan . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

142.60

Helen’s share of Medicare tax paid by Susan

33.35

Do not use Schedule H if you chose to report employment taxes for

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,475.95

your household employees along with your other employees on

Form 941, Employer’s Quarterly Federal Tax Return, or Form

943, Employer’s Annual Federal Tax Return for Agricultural Em-

ployees. If you report this way, be sure to include your household

H-5

Instructions For Schedule H (Form 1040) 2003 Page 5

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