Instructions For Schedule H (Form 1040) - Household Employment Taxes - 2007 Page 6

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Any employee Medicare tax withheld.
You Should Also Know
Any federal income tax withheld.
Any advance EIC payments you made.
What’s New for 2008
What Is the Earned Income Credit
The tax rates mentioned in the instructions for Part I of
(EIC)?
Schedule H will not change. The FUTA tax rate men-
TIP
tioned in Part II will decrease from 6.2% to 6.0%. How-
The EIC is a refundable tax credit for certain workers.
ever, there is pending legislation to eliminate the
reduction in rate. If the legislation is enacted, the rate will remain at
Which employees must I notify about the EIC?
You must notify
6.2%. The cash wage threshold that you pay to any one household
your household employee about the EIC if you agreed to withhold
employee increases to $1,600 for 2008. The 2008 Employee Social
federal income tax from the employee’s wages but did not do so
Security and Medicare Tax Withholding Table is in Pub. 926,
because the income tax withholding tables showed that no tax
Household Employer’s Tax Guide.
should be withheld.
Note.
You are encouraged to notify each employee whose wages
The $97,500 amount
Limit on wages subject to social security tax.
for 2007 were less than $37,783 ($39,783 if married filing jointly)
in the instructions for Part I of Schedule H will increase to
that he or she may be eligible for the EIC.
$102,000.
You must give the
How and when must I notify my employees?
Transportation (commuting) benefits.
The monthly exclusion for
employee one of the following:
commuter highway vehicle transportation and transit passes in-
The official IRS Form W-2, that has the required information
creases to $115.
about the EIC on the back of Copy B.
A substitute Form W-2 with the same EIC information on the
Estimated Tax Penalty
back of the employee’s copy that is on Copy B of the official IRS
Form W-2.
You may need to increase the federal income tax withheld from
Notice 797, Possible Federal Tax Refund Due to the Earned
your pay, pension, annuity, etc. or make estimated tax payments to
Income Credit (EIC).
avoid an estimated tax penalty based on your household employ-
Your written statement with the same wording as Notice 797.
ment taxes shown on line 27 of Schedule H. You may increase your
federal income tax withheld by filing a new Form W-4, Employee’s
If you are not required to give the employee a Form W-2, you
Withholding Allowance Certificate, or Form W-4P, Withholding
must provide the notification by February 7, 2008.
Certificate for Pension or Annuity Payments. Make estimated tax
You must hand the notice directly to the employee or send it by
payments by filing Form 1040-ES, Estimated Tax for Individuals.
First-Class Mail to the employee’s last known address.
For more information, see Pub. 505, Tax Withholding and Esti-
mated Tax.
Eligible employees claim
How do my employees claim the EIC?
the EIC on their 2007 tax returns.
Estimated tax payments must be made as the tax liabil-
Eligible em-
How do my employees get advance EIC payments?
ity is incurred: by April 15, June 15, September 15, and
!
ployees who have a qualifying child can get part of the credit with
the following January 15. If you file your form 1040 by
CAUTION
their pay during the year by giving you a completed Form W-5. You
January 31 and pay the rest of the tax that you owe, you
must include advance EIC payments with wages paid to these
do not need to make the payment due on January 15.
employees. For details, including tables that show you how to
You will not be penalized for failure to make estimated
Exception.
figure the amount to add to the employee’s net pay, see Pub.15
tax payments if both 1 and 2 below apply for the year.
(Circular E), Employer’s Tax Guide.
1. You will not have federal income tax withheld from wages,
pensions, or any other payments you receive.
Rules For Business Employers
2. Your income taxes, excluding your household employment
taxes, would not be enough to require payment of estimated taxes.
Do not use Schedule H if you chose to report employment taxes for
your household employees along with your other employees on
Form 941, Employer’s QUARTERLY Federal Tax Return, Form
943, Employer’s Annual Federal Tax Return for Agricultural Em-
What Records To Keep
ployees, or Form 944, Employer’s ANNUAL Federal Tax Return.
If you report this way, be sure to include your household employ-
You must keep copies of Schedule H and related Forms W-2, W-3,
ees’ wages on your Form 940, Employer’s Annual Federal Unem-
W-4, and W-5, Earned Income Credit Advance Payment Certifi-
ployment (FUTA) Tax Return.
cate, for at least 4 years after the due date for filing Schedule H or
the date the taxes were paid, whichever is later. If you have to file
Form W-2, also keep a record of each employee’s name and social
State Disability Payments
security number. Each payday, you should record the dates and
amounts of:
Certain state disability plan payments to household employees are
Cash and noncash wage payments.
treated as wages subject to social security and Medicare taxes. If
Any employee social security tax withheld.
your employee received payments from a plan that withheld the
H-6

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