{"id":16064,"date":"2018-07-02T11:58:42","date_gmt":"2018-07-02T15:58:42","guid":{"rendered":"https:\/\/gtm.com\/household\/?p=16064"},"modified":"2024-08-26T13:38:01","modified_gmt":"2024-08-26T17:38:01","slug":"form-941","status":"publish","type":"post","link":"https:\/\/gtm.com\/household\/form-941\/","title":{"rendered":"4 Big Reasons Why You Should File Schedule H and Not Form 941"},"content":{"rendered":"
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To reduce accounting issues, the risk of penalties, and dual reporting, household employers should avoid filing Form 941 and use Schedule H instead.<\/p><\/div>\n

Figuring out and filing household employment taxes can be confusing and time-consuming. Even the most well-organized and tax-savvy families can get tripped up by small details that will cause big headaches down the road. Using Form 941 and not Schedule H<\/a> is a common way families, accountants, and business payroll firms handling household payroll make mistakes when reporting domestic employment taxes.<\/p>\n

This misstep can make more work for the family, increase the risk of penalties, cause dual reporting to the IRS, and create other accounting issues.<\/p>\n

More work and potential penalties for you<\/h2>\n

Schedule H was created specifically for household employers to report wages paid to employees during the year. It\u2019s an annual filing that\u2019s prepared with your personal income tax return income.<\/p>\n

Form 941, however, is filed every quarter even if you didn\u2019t pay an employee during that period. If you fail to file Form 941 \u2013 even if there was no payroll to report \u2013 you will incur penalties.<\/p>\n

Often times a business payroll firm will file a family\u2019s household employment taxes using Form 941 as they do with their commercial clients. A family\u2019s accountant may do the same since they may not frequently deal with clients who have domestic employees.<\/p>\n

To save yourself time and avoid costly penalties, just file Schedule H<\/a> once, and don\u2019t worry about doing this every quarter.<\/p>\n

Dual reporting<\/h2>\n

When filing Schedule H<\/a> \u2013 as domestic employers are required to do \u2013 the total household payroll tax due is added to your personal return (Form 1040) and could decrease your anticipated refund or increase what you owe.<\/p>\n

If you\u2019ve filed Form 941 quarterly, you\u2019ve already reported and paid these taxes. Now you\u2019ve wound up paying the IRS twice, something no one wants to do.<\/p>\n

This can easily happen if a family \u2013 either on their own or through a business payroll company \u2013 paid household employment taxes using Form 941 and then uses their accountant for their personal tax return. The accountant asks about any type of household employment, the family acknowledges they employed a domestic worker, and the accountant gathers the relevant information. The accountant then completes Schedule H<\/a> and files it with the family\u2019s tax return.<\/p>\n

To avoid dual reporting, simply file Schedule H<\/a> with your personal tax return at the end of the year.<\/p>\n

Accounting issues<\/h2>\n

The IRS does allow a sole proprietor of a business or farm who also has a domestic employee to report household payroll taxes on their company\u2019s Form 941.<\/p>\n

However, a sole proprietor \u2013 or any business owner for that matter \u2013 can\u2019t put a domestic worker on their business payroll. Deducting employee-related business expenses requires all employees to be direct contributors to the success of the business. The IRS has ruled domestic workers do not qualify as direct contributors. Including a domestic worker on your business payroll is considered an illegal tax deduction.<\/p>\n

To keep it simple, it\u2019s best to keep household payroll taxes separate from business-related taxes. File Schedule H for household and Form 941 for business.<\/p>\n

GTM can help<\/h2>\n

Commercial payroll firms may have expertise in handling business taxes but do not have experience in dealing with household payroll and the many tax, wage, and labor nuances associated with having a domestic employee. They often treat a family with a nanny as a small business and that\u2019s going to cause issues right from the start.<\/p>\n

Also, accounting firms will partner with GTM to manage household payroll and taxes for their clients. While many accountants are excellent at what they do, even the most skilled ones can get tripped up by household payroll.<\/p>\n

That\u2019s where a firm like GTM can help. We\u2019ve been doing household payroll and taxes for nearly 30 years and have helped tens of thousands of families. We\u2019ve seen it all and know how to resolve tax issues and better yet, prevent them in the first place!<\/p>\n

We can help if you\u2019ve been mistakenly filing Form 941, dual reported, or encountered other accounting issues even if you\u2019ve been using a commercial payroll firm or your accountant.<\/p>\n

Call (800) 929-9213 for a free, no-obligation consultation with a household employment expert.<\/p>\n

Download The Complete Guide to Household Payroll<\/h2>\n

Get our complimentary guide and learn everything you need to know about paying your employees legally and filing your taxes the right way.
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