Household Employee

[Dave T]

Newer (2021) client gets married in 2022 and wife begins working as a nanny in latter part of 2022. She earns $ 2,000 and does not receive a W2

I know I can record the income on line 1b as Household Employee but am wondering about the tax  component. Since no taxes were withheld ( paid in cash) does she need to record the income on Sch C and pay S/E tax? 

Thank you

Dave T

 

 

[DANRVAN]

5 hours ago, Dave T said:

Since no taxes were withheld ( paid in cash) does she need to record the income on Sch C and pay S/E tax? 

Since she is under the threshold for household employees fica, I would not put it on C.

[Lee B]

The OP implies that working as a nanny began in late 2022 and continued into 2023.

In which case I would put the $2,000 on Schedule C. 

I was not aware that $2,000 could be excluded from SE Tax?

[DANRVAN]

52 minutes ago, cbslee said:

The OP implies that working as a nanny began in late 2022 and continued into 2023.

In which case I would put the $2,000 on Schedule C. 

I was not aware that $2,000 could be excluded from SE Tax?

There is a threshold for paying and withholding FICA/mc for household employees.

If she is under that threshold then why subject her to SE tax unless she choses to?

[Lee B]

Note: If the taxpayer paid more than $1,000 in any calendar quarter, then they are required to file Schedule H and pay FUTA at the 6 % rate

unless SUTA has been paid.

[DANRVAN]

2 hours ago, cbslee said:

Note: If the taxpayer paid more than $1,000 in any calendar quarter, then they are required to file Schedule H and pay FUTA

Right, but that applies to employer; so would not directly  effect the client of OP who is an employee.

[Lee B]

The exclusion you keep referring to applies to the the withholding of taxes by the Household Employer.

I don't believe it absolves the employee from paying employment taxes.

 

[DANRVAN]

3 hours ago, cbslee said:

Note: If the taxpayer paid more than $1,000 in any calendar quarter, then they are required to file Schedule H and pay FUTA

Are you saying employee should file H and pay the FUTA, tax, which is the employer's responsibility?

1 hour ago, cbslee said:

The exclusion you keep referring to applies to the the withholding of taxes by the Household Employer.

I don't believe it absolves the employee from paying employment taxes.

The exclusion does not have anything to do with FUTA, and I don't think I ever said it did.  What I am saying is the employee does not have to make up for it; whether it was due on form 940 or Schedule H.

The code says that wages paid to a household employee below the threshold are not subject to FICA/mc.  Why should a taxpayer working as an employee with wages below the threshold pay into them by filing a schedule C?

[Lee B]

Good job on knocking down the strawmen you have created.

[jklcpa]

Enter as wages so it's subject to regular tax but not s.e.tax.

Also, as an employee, Sch C would not be appropriate where this person would end up paying both shares of the fica and medicare.

[DANRVAN]

I

3 minutes ago, jklcpa said:

Enter as wages so it's subject to regular tax but not s.e.tax.

That is what I have been saying all along.

 

[DANRVAN]

2 hours ago, cbslee said:

Good job on knocking down the strawmen you have created.

I don't think that is fair statement, but you are entitled to your opinion.

[jklcpa]

4 minutes ago, DANRVAN said:

I

That is what I have been saying all along.

 

I know it is.

[BulldogTom]

Help me with this please?   I have never had a household employee client, so I haven't put this on a return.   What I thought I knew was this:

If the employer does not pay the employee more than $2400, they don't have a WITHHOLDING AND 941/944 RETURN requirement, but they are still responsible for providing the employee with a W2.   They pay both halves of the SS/MED on Schedule H.   Do I have this right?

So in the original post above, the employer should still be sending the employee a W2?   Correct?   And they are going to put the amount of SS & Med the employer is going to pay because they did not withhold on the employee W2?   Correct?   

Tom
Longview, TX

[jklcpa]

No, Tom.  IRS tax topic 756 explains it well. Here's the link,  or search for that topic #

https://www.irs.gov/taxtopics/tc756

[DANRVAN]

50 minutes ago, BulldogTom said:

employer does not pay the employee more than $2400

If  less than $2,400 , then not subject to SS on Schedule H.

If paid $1,000 or more in any quarter, then subject to FUTA on Schedule H.

W-2 should be filed regardless.  

If less than $2,400 and ss withheld, should consider refunding employee for fica since it was not required.

 

[austexcpa]

For 2022 form 1040 line 1b