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Are You Prepared for the New Schedule H?

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For this tax season, there is an updated Schedule H for your clients who employ household help. It reconciles pandemic-related paid leave provided to their workers last year under the Families First Coronavirus Act (FFCRA).

Feb 18th 2021
Founder and CEO GTM Payroll Services
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Families report their household employment taxes on Schedule H, which is attached to their personal tax returns. If your client paid cash wages to a household employee and the wages were subject to Social Security, Medicare, and/or unemployment taxes, or if they withheld federal income tax, your client likely needs to file Schedule H.

Background: In 2020, household employers were required to provide paid family leave to their workers for qualified reasons due to the pandemic. They can take a tax credit to offset the cost of paid family leave. If they have not been remitting their nanny taxes on a quarterly basis, then you can reconcile the tax credit with Schedule H.

Filing Schedule H

Some of what you will need to know includes:

  • qualified sick and family leave wages paid to a client's employee
  • your client's share of Social Security taxes on that qualified paid leave
  • refundable and non-refundable portions of the employer tax credit for paid leave

Now, on part one of Schedule H where you indicate Social Security, Medicare, and federal income taxes, you will need to indicate:

  • Qualified sick and family wages from Line 1a on Line 1b
  • Employer share of Social Security tax on qualified sick and family leave wages by multiplying Line 1b by 6.2 percent
  • Total Social Security tax by subtracting Line 2b from Line 2a
  • Total Social Security, Medicare, and federal income taxes by adding Lines 2c, 4, 6, and 7
  • Nonrefundable portion of credit for qualified sick and family leave wages from Worksheet 3 on Line 8b
  • Total Social Security, Medicare, and federal income taxes after nonrefundable credit on Line C by subtracting Line 8b from Line 8a
  • Maximum amount of the employer share of Social Security tax that can be deferred on Line 8d
  • Refundable portion of credit for qualified sick and family leave wages from Worksheet 3 on Line 8e
  • Qualified sick leave wages on Line 8f
  • Qualified health plan expenses allocable to qualified sick leave wages on Line 8g
  • Qualified family leave wages on Line 8h
  • Qualified health plan expenses allocable to qualified family leave wages on Line 8i

Household employers can receive a dollar-for-dollar tax credit for providing paid leave to their workers for qualified reasons related to the pandemic. Families can retain funds that they would otherwise pay to the IRS in payroll taxes.

Typical household employees include nannies, housekeepers, in-home senior caregivers and estate staff.

During the pandemic, many families entered nanny shares where a nanny cares for children from multiple families in one of the family’s homes. That nanny is considered an employee of each family so each family must file Schedule H. Also, teachers or tutors hired to supervise online learning or to lead learning pods where a teacher conducts instruction for children from multiple families in one of the family’s homes, are also considered household employees.

Providing FFCRA Paid Leave

For certain circumstances related to COVID-19, household employees were eligible for:

  • Up to two weeks of sick leave (full pay for self, 2/3 pay for family care) for illness, quarantine, or school closures
  • Up to 12 weeks of Family and Medical Leave Act (FMLA) leave for school closures (10 days unpaid and then up to 10 weeks at 2/3 pay)

There are, of course, limits to employee pay received through FFCRA leave. The mandatory requirements of FFCRA paid leave expired at the end of 2020.

Through March 31, 2021, employers can offer paid leave on a voluntary basis. If offered, workers can use any leave available to them that they did not use in 2020.

Taking FFCRA Tax Credits

Household employers can take advantage of the tax credits offered by the FFCRA. A payroll tax credit will apply to both the emergency FMLA expansion and the emergency sick leave. This dollar-for-dollar credit for sick leave and paid FMLA wages can be taken against the employer portion (6.2 percent of gross wages) of Social Security taxes.

A refund is possible for amounts that exceed what is available as a credit. However, an employer’s credit is capped by the maximum amount of pay an employee can receive through the FFCRA. Tax credits are also available on any voluntary paid leave provided through March 31.

Completing Form W-2

Employers were required to report the amount of qualified sick and family leave wages paid to their workers under the FFCRA on Form W-2 in either Box 14 of Form W-2, or in a statement provided with Form W-2. Employees were due their W-2s on February 1.

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