Last month, the IRS released a draft version of the 2020 Schedule H. As expected, the draft includes several new lines to reconcile the paid leave provisions outlined in the Families First Coronavirus Response Act. Household employers are required to provide paid leave to their workers for qualified reasons due to the pandemic. They can take a tax credit to offset the cost of paid leave.
Schedule H is where you report household employment taxes to the IRS and is filed with your personal tax return. If you paid cash wages to a household employee and the wages were subject to Social Security, Medicare, and/or unemployment taxes, or if you withheld federal income tax, then you likely need to file Schedule H. Learn more about filing Schedule H for household employment taxes.
Some of what you’ll need to know includes:
- qualified sick and family leave wages paid to an employee
- the employer’s share of Social Security taxes on that qualified paid leave
- the 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’ll 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
The 2020 Schedule H draft form points to a Worksheet 3, which would be included in the form’s instructions. However, instructions for the 2020 Schedule H draft have not been released.
Please note that draft forms are not final and are not to be filed by taxpayers.
GTM Payroll Services will complete Schedule H for clients who have signed up for the year-end service.
FFCRA paid leave for household employees
For certain circumstances related to COVID-19, household employees will be 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)
The law applies to leave taken between April 1 and December 31, 2020. Learn more about FFCRA paid leave.
FFCRA tax credits for household employers
To help cover the costs of mandated leave, FFCRA provides employers two refundable payroll tax credits that are designed to immediately and fully reimburse them. Employers will be repaid, dollar-for-dollar, for the cost of providing coronavirus leave to their employees. Learn more about FFCRA tax credits.
GTM can help
GTM Payroll Services not only can manage your household payroll and taxes throughout the year but offers a year-end package that includes Schedule H as well as Form W-2 for your employee and Form W-3, which we’ll file with the Social Security Administration. That’s a lot less paperwork, fewer potential tax mistakes, and more free time for you for the things you enjoy in life. To learn more, call us at (800) 929-9213 for a free consultation with a household employment expert. Behind on your nanny taxes? Now is the time to catch up. Ask about our back tax service to get compliant before taxes are due.
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