Many first-time household employers miss this. They treat the worker as a contractor, pay in cash and keep no records. The result is an unexpected tax bill at filing time.
This guide covers who must file, which taxes are included, what records you need, how to complete each part and how the result flows to Form 1040. All dollar amounts are US dollars and apply to tax year 2026. The IRS had released only draft versions of the 2026 forms at the time of writing, so confirm every figure against the final IRS form and instructions.
Key Takeaways
- Schedule H calculates and reports federal household employment taxes for qualifying employees.
- Filing depends on a $3,000 per-employee wage test, a $1,000 quarterly FUTA test and any federal income tax withheld.
- It covers Social Security, Medicare, FUTA and withheld income tax. State unemployment is handled separately.
- An EIN, payday records and timely payments prevent year-end surprises.
What Is Schedule H and Who Must File It?
Purpose of the form
Schedule H reports household Social Security, Medicare, FUTA and any federal income tax you withheld. It is not Form 941, which is the quarterly payroll return for business employers. It is also not Schedule C, which reports a sole proprietor's business income or loss.
For the 2026 draft, the total flows to Schedule 2, line 17a, then to Form 1040, line 23. Check these line references on the final forms.
Who counts as a household employee
The test is control. If you control what work is done and how, the worker is generally your employee, whatever the job title. IRS Publication 15-A frames this as behavioural control, financial control and the type of relationship.
Likely household employees include:
- Nannies and babysitters
- Housekeepers and cooks
- Private nurses, health aides and caretakers
- Drivers and yard workers
The IRS gives a clear example. Peyton Shore babysits and does housework four days a week, follows instructions and uses the employer's supplies. She is a household employee. A lawn-care business that brings its own helpers and tools, and serves the public, is not.
When Schedule H is required
Three triggers can apply:
- FICA test: you paid any one employee $3,000 or more in cash wages in 2026. Tax then applies to all wages, including the first $3,000.
- FUTA test: you paid $1,000 or more in total cash wages to all household employees in any calendar quarter of 2025 or 2026.
- Withholding trigger: you withheld federal income tax from an employee's pay, even if the wage thresholds were not met.
Exclusions and special cases
Exclusions depend on the tax and the worker:
| Worker | Social Security/Medicare | FUTA |
|---|---|---|
| Your spouse | Excluded | Excluded |
| Your child under 21 | Excluded | Excluded |
| Your parent | Excluded unless narrow care conditions are met | Excluded |
| Employee under 18 | Excluded unless household work is the principal occupation (a student's is not) | No general exclusion |
Multiple employees, live-in arrangements and workers employed across states can change the maths. Treat each as a flag for a closer review.
What Taxes and Information Does Schedule H Cover?
Federal taxes reported
| Tax | Employee share | Employer share | 2026 limit |
|---|---|---|---|
| Social Security | 6.2% | 6.2% | $184,500 wage base |
| Medicare | 1.45% | 1.45% | No ceiling |
| Additional Medicare | 0.9% withholding | None | Wages over $200,000 |
| FUTA | None | 6.0% before credit | First $7,000 per employee |
Schedule H reports the combined 12.4% and 2.9%. Your payroll records should show how much of that you withheld from the employee.
FUTA is employer-only. A credit of up to 5.4% for timely state unemployment contributions can reduce the effective rate to 0.6%. That depends on state eligibility and any credit reductions, which the Department of Labor publishes. Check that list for final 2026 reductions before you file.
Federal income tax withholding is voluntary. The employee asks, you agree and the employee gives you a Form W-4.
Federal versus state obligations
State unemployment insurance, state income tax withholding and registration run through state agencies, not Schedule H. They matter federally, though. For a calendar-year employer, 2026 state contributions must be paid by April 15, 2027 to get the full FUTA credit. Late payments earn only 90% of the allowable credit.
Records to gather first
Per IRS guidance, keep:
- Your EIN (not your SSN) for household-employee forms
- Each employee's name, address and SSN, requested no later than the first wage payment
- Form I-9, kept in your records and not sent to the IRS
- Form W-4, if you withhold income tax
- Pay date, cash wages, Social Security/Medicare withheld and income tax withheld for every payday
- State unemployment payments and rates
- Estimated tax payments made
Keep employment tax records for at least four years after the return's due date or the payment date, whichever is later.
How to Complete Schedule H
Start with the current form
Download the current Schedule H and instructions from IRS.gov. Do not carry thresholds, rates or line numbers over from a prior year. Reconcile bank records, pay stubs and state notices first, and total wages for each employee separately.
The opening questions
The 2026 draft has questions A to C:
- A: Did you pay any one employee $3,000 or more? If yes, skip to line 1.
- B: Did you withhold federal income tax? If yes, skip to line 7.
- C: Did you meet the $1,000 quarterly FUTA test? If no, you do not file. If yes, skip to line 10.
Part I: Social Security, Medicare and income tax
Cash wages include checks and money orders, plus bonuses and overtime. Food and lodging are excluded from FICA wages. If you pay the employee's FICA share yourself, count it as income-tax wages only, not as Social Security, Medicare or FUTA wages.
On the draft:
- Lines 1-2: Social Security wages × 12.4%.
- Lines 3-4: Medicare wages × 2.9%.
- Lines 5-6: Additional Medicare wages × 0.9%.
- Lines 7-8: add federal income tax withheld, then total lines 2, 4, 6 and 7.
Part II: FUTA
Lines 10-12 ask whether you paid into one state only, paid on time, and whether all FUTA wages were also state-taxable.
- Yes on all three: use Section A (contributions paid, FUTA wages × 0.6%).
- No on any question: use Section B, a state-by-state table with the 6% gross tax and 5.4% maximum credit.
Worksheet 1 adjusts for late state contributions. Worksheet 2 handles credit reductions, and Worksheet 1 comes first if both apply. Reconcile your figures to state records, because late or missing payments reduce the credit.
Parts III and IV
Part III totals the tax: line 8 plus any FUTA from Part II. That total carries to your Form 1040. Part IV (address and signature) applies only when you file Schedule H alone because you are not filing any of the listed returns.
Worked example (fictional)
Maria pays her nanny $20,000 in cash wages during 2026 and withholds no income tax.
- Social Security: $20,000 × 12.4% = $2,480
- Medicare: $20,000 × 2.9% = $580
- Line 8 total: $3,060
- FUTA, simple method: $7,000 × 0.6% = $42
- Part III total: $3,102
Maria carries $3,102 to Schedule 2, then Form 1040. Check the arithmetic against the final form before relying on any such example.
How Schedule H Connects to Form 1040 and Tax Payments
Annual filing and payments
Schedule H calculates the annual liability. You attach it to your income tax return, due April 15, 2027 for calendar-year 2026. If you have no return to file, you file it alone.
You can prepay in two ways:
- Increase withholding by giving your own employer a new W-4 (separate from your employee's W-4).
- Make Form 1040-ES estimated payments on April 15, June 15, September 15, 2026 and January 15, 2027.
Compare the Schedule H total to what you have paid so you neither pay twice nor miss a balance. Publication 926 notes that an underpayment penalty can apply.
Wage forms
Schedule H is the employer's tax calculation. Form W-2 is the employee wage report.
By February 1, 2027:
- Give your employee a Form W-2
- File Copy A with Form W-3 at the SSA
- Mark "Hshld. emp." in W-3 box b
The employee remains responsible for reporting their own wages and any personal income tax.
Filing methods and state follow-up
Electronic filing with your return is encouraged. Only final forms can be filed electronically, so check your software.
After the federal side is done, state unemployment, state withholding and workers' compensation may still need attention.
Common Errors and When to Seek Professional Help
Mistakes that cause bad filings
- Treating an employee as a contractor without a reasonable basis. You are liable for the taxes. Form SS-8 requests a status determination.
- Using an outdated Schedule H.
- Entering the wrong EIN or SSN.
- Completing W-2 boxes 3-6 for wages under $3,000, which the SSA rejects.
- Skipping FUTA because the amount looks small.
- Assuming state unemployment is reported through Schedule H.
- Leaving tax unpaid. The IRS failure-to-pay penalty is 0.5% per month, generally capped at 25%.
If you filed with an error, file Form 1040-X with a corrected Schedule H. Reconcile Schedule H with payroll records, W-2 data, state filings and estimated payments before you file.
When to get professional review
Seek advice if you have:
- Multiple employees or workers in more than one state
- Family-member caregivers
- Prior-year underreporting
- Missing wage forms or IRS notices
- Unusual compensation or doubts about filing status
VJM Global provides tax compliance and accounting support through CPAs and U.S.-compliant professionals. The firm has experience serving American business owners and assists with Form 1040 filings. It does not offer a dedicated household payroll service.
Action plan
Whether you file on your own or with help, work through this checklist:
- Classify the worker.
- Get an EIN.
- Keep payday records.
- Make payments during the year.
- Issue W-2 and W-3 forms by the deadline.
- Complete the current-year Schedule H.
- Keep supporting documents for at least four years.
Thresholds, rates, deadlines and state rules change. Confirm details with current IRS instructions or a qualified tax professional.
Frequently Asked Questions
What is Schedule H (Form 1040) for?
Qualifying household employers use it to calculate and report federal household employment taxes. The result connects to the individual tax return.
Who has to file Schedule H?
You file if you paid one employee $3,000 or more in cash wages in 2026, withheld federal income tax, or met the $1,000 quarterly FUTA test. Verify current exceptions in the IRS instructions.
Is Schedule H filed with Form 1040?
Yes. You attach it to your return, and the total flows through Schedule 2 to Form 1040. If you have no return to file, you file Schedule H alone.
What taxes are reported on Schedule H?
Social Security, Medicare, FUTA and any federal income tax withheld. State unemployment is filed separately with your state agency.
What information do I need to complete Schedule H?
Your EIN, wage totals per employee, withholding records, state unemployment payments and rates, and estimated tax payments.
Is Schedule H the same as Form 941?
No. Schedule H is the household-employer form tied to an individual return. Form 941 is the quarterly payroll return generally used by business employers.
