Instructions For Schedule H (Form 1040) - 2016 (Page 2 of 12) in pdf

ditional Medicare Tax from wages you pay to an employee in

Contents

Page

excess of $200,000 in a calendar year. You’re required to begin

withholding Additional Medicare Tax in the pay period in

which you pay wages in excess of $200,000 to an employee

What Records To Keep

. . . . . . . . . . . . . . . . . . . . . . . .

and continue to withhold it each pay period until the end of the

What Is the Earned Income Credit (EIC)?

. . . . . . . . . . . .

calendar year. Additional Medicare Tax is only imposed on the

Rules for Business Employers

. . . . . . . . . . . . . . . . . . . .

employee. There is no employer share of Additional Medicare

State Disability Payments

. . . . . . . . . . . . . . . . . . . . . . .

Tax. All wages that are subject to Medicare tax are subject to

Additional Medicare Tax withholding if paid in excess of the

How To Correct Schedule H

. . . . . . . . . . . . . . . . . . . . .

$200,000 withholding threshold.

How To Get Forms and Publications

. . . . . . . . . . . . . . .

For more information on Additional Medicare Tax, visit

Completed Examples of Schedule H, Form W-2, and

IRS.gov and enter “Additional Medicare Tax” in the search

Form W-3

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

box.

Privacy Act and Paperwork Reduction Act Notice

. . . . . .

Outsourcing payroll duties. You’re responsible to ensure that

tax returns are filed and deposits and payments are made, even

Future Developments

if you contract with a third party to perform these acts. You re-

main responsible if the third party fails to perform any required

action. If you choose to outsource any of your payroll and rela-

For the latest information about developments related to Sched-

ted tax duties (that is, withholding, reporting, and paying over

ule H and its instructions, such as legislation enacted after they

social security, Medicare, FUTA, and income taxes) to a

were published, go to

third-party payer, such as a payroll service provider or report-

What's New

ing agent, visit IRS.gov and enter “outsourcing payroll duties”

in the search box for helpful information on this topic.

Changes to tax rates and wage threshold. The social securi-

Paid preparers are required to sign Schedule H. Your paid

ty tax rate is 6.2% each for the employee and employer, un-

preparer must sign Schedule H in Part IV unless you’re attach-

changed from 2015. The social security wage base limit is

ing Schedule H to Form 1040, 1040NR, 1040-SS, or 1041. A

$118,500, unchanged from 2015.

paid preparer must sign Schedule H and provide the informa-

The Medicare tax rate is 1.45% each for the employee and

tion requested in the Paid Preparer Use Only section only if

employer, unchanged from 2015. There is no wage base limit

the preparer was paid to prepare Schedule H and isn't your em-

for Medicare tax. If you pay a household employee $2,000 or

ployee. The preparer must give you a copy of the return in ad-

more in cash wages during 2016, you must report and pay so-

dition to the copy to be filed with the IRS.

cial security and Medicare taxes on all the wages. For more in-

If you’re required to file a 2016 Form W-2 for any house-

formation, see Cash wages and $2,000 test, later.

hold employee, you must also send Form W-3 with Copy A of

For information about the rates and wage threshold that will

Form(s) W-2 to the SSA. You’re encouraged to file your

apply in 2017, see Pub. 926 (released in December 2016).

Forms W-2 and W-3 electronically. Visit the SSA's Employer

W-2

Filing

Instructions

Information

website

Filing due date for 2016 Forms W-2 and W-3. Both paper

to learn about electronic fil-

and electronically filed 2016 Forms W-2 and W-3 must be filed

ing.

with the SSA by January 31, 2017.

Who Needs To File Schedule H?

Qualified parking exclusion and commuter transportation

benefit. For 2016, the monthly exclusion for qualified parking

You must file Schedule H if you answer “Yes” to any of the

is $255 and the monthly exclusion for commuter highway vehi-

questions on lines A, B, or C of Schedule H.

cle transportation and transit passes is $255.

Did you have a household employee? If you hired someone

Credit reduction state. A state that hasn't repaid money it

to do household work and you could control what work he or

borrowed from the federal government to pay unemployment

she did and how he or she did it, you had a household employ-

benefits is a “credit reduction state.” The Department of Labor

ee. This is true even if you gave the employee freedom of ac-

determines these states. If an employer pays wages that are

tion. What matters is that you had the right to control the de-

subject to the unemployment tax laws of a credit reduction

tails of how the work was done.

state, that employer must pay additional federal unemployment

Example. You paid Betty Oak to babysit your child and do

tax.

light housework 4 days a week in your home. Betty followed

For 2016, there are credit reduction states. If you paid wages

your specific instructions about household and child care du-

that were subject to the unemployment compensation laws of a

ties. You provided the household equipment and supplies Betty

credit reduction state, your credit against federal unemploy-

needed to do her work. Betty is your household employee.

ment tax will be reduced based on the credit reduction rate (for

Household work is work done in or around your home.

example, 0.018) for that credit reduction state.

Some examples of workers who do household work are:

Reminders

Additional Medicare Tax withholding. In addition to with-

holding Medicare tax at 1.45%, you must withhold a 0.9% Ad-

H-2

Instructions For Schedule H (Form 1040) - 2016 Page 2

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