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Publication 926
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Important RemindersSocial security and Medicare wage threshold is $1,400. The social security and Medicare wage threshold is $1,400 for 2003. This means that if you pay a household employee cash wages of less than $1,400 in 2003, you do not have to report and pay social security and Medicare taxes on that employee's 2003 wages. For more information, see Social security and Medicare wages under Social Security and Medicare Taxes. Photographs of missing children. The Internal Revenue Service is a proud partner with the National Center for Missing and Exploited Children. Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child. IntroductionThe information in this publication applies to you only if you have a household employee. If you have a household employee in 2003, you may need to pay state and federal employment taxes for 2003. You generally must add your federal employment taxes to the income tax that you will report on your 2003 federal income tax return. This publication will help you decide whether you have a household employee and, if you do, whether you need to pay federal employment taxes (social security tax, Medicare tax, federal unemployment tax, and federal income tax withholding). It explains how to figure, pay, and report these taxes for your household employee. It also explains what records you need to keep. This publication also tells you where to find out whether you need to pay state unemployment tax for your household employee. Comments and suggestions. We welcome your comments about this publication and your suggestions for future editions. You can e-mail us while visiting our web site at You can write to us at the following address:
We respond to many letters by telephone. Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence. Do You Have a Household Employee?You have a household employee if you hired someone to do household work and that worker is your employee. The worker is your employee if you can control not only what work is done, but how it is done. If the worker is your employee, it does not matter whether the work is full time or part time or that you hired the worker through an agency or from a list provided by an agency or association. It also does not matter whether you pay the worker on an hourly, daily, or weekly basis or by the job. Example. You pay Betty Shore to babysit your child and do light housework 4 days a week in your home. Betty follows your specific instructions about household and child care duties. You provide the household equipment and supplies that Betty needs to do her work. Betty is your household employee. Household work. Household work is work done in or around your home by the following people.
Workers who are not your employees. If only the worker can control how the work is done, the worker is not your employee but is self-employed. A self-employed worker usually provides his or her own tools and offers services to the general public in an independent business. A worker who performs child care services for you in his or her home generally is not your employee. If an agency provides the worker and controls what work is done and how it is done, the worker is not your employee. Example. You made an agreement with John Peters to care for your lawn. John runs a lawn care business and offers his services to the general public. He provides his own tools and supplies, and he hires and pays any helpers he needs. Neither John nor his helpers are your household employees. More information. More information about who is an employee is in Publication 15-A, Employer's Supplemental Tax Guide. Can Your Employee Legally Work in the United States?
When you hire a household employee to work for you on a regular basis, you and the employee must complete the Immigration and Naturalization Service (INS) Form I-9, Employment Eligibility Verification. No later than the first day of work, the employee must complete the employee section of the form by providing certain required information and attesting to his or her current work eligibility status in the United States. You must complete the employer section by examining documents presented by the employee as evidence of his or her identity and employment eligibility. Acceptable documents to establish identity and employment eligibility are listed on Form I-9. You should keep the completed Form I-9 in your own records. Do not submit it to the IRS, the INS, or any other government or other entity. The form must be kept available for review upon notice by an authorized U.S. Government official. Two copies of Form I-9 are contained in the INS Handbook for Employers (Form M-274).
Do You Need To Pay Employment Taxes?If you have a household employee, you may need to withhold and pay social security and Medicare taxes, pay federal unemployment tax, or both. To find out, read Table 1. You do not need to withhold federal income tax from your household employee's wages. But if your employee asks you to withhold it, you can. See Do You Need To Withhold Federal Income Tax, later. If you need to pay social security, Medicare, or federal unemployment tax or choose to withhold federal income tax, read Table 2 for an overview of what you may need to do.
State employment taxes. You should contact your state unemployment tax agency to find out whether you need to pay state unemployment tax for your household employee. For the address and phone number, see the Appendix, near the end of the publication. You should also find out whether you need to pay or collect other state employment taxes or carry workers' compensation insurance. Social Security and Medicare TaxesThe social security tax pays for old-age, survivors, and disability benefits for workers and their families. The Medicare tax pays for hospital insurance. Both you and your household employee may owe social security and Medicare taxes. Your share is 7.65% (6.2% for social security tax and 1.45% for Medicare tax) of the employee's social security and Medicare wages. Your employee's share is the same.
You are responsible for payment of your employee's share of the taxes as well as your own. You can either withhold your employee's share from the employee's wages or pay it from your own funds. If you decide to pay the employee's share from your own funds, see Not withholding the employee's share, later. Pay the taxes as discussed under How Do You Make Tax Payments, later. Also, see What Forms Must You File, later. Social security and Medicare wages. You figure social security and Medicare taxes on the social security and Medicare wages you pay your employee. If you pay your household employee cash wages of $1,400 or more in 2003, all cash wages you pay to that employee in 2003 (regardless of when the wages were earned) are social security and Medicare wages. However, any noncash wages you pay do not count as social security and Medicare wages. If you pay the employee less than $1,400 in cash wages in 2003, none of the wages you pay the employee are social security and Medicare wages and neither you nor your employee will owe social security or Medicare tax on those wages. Cash wages. Cash wages include wages you pay by check, money order, etc. Cash wages do not include the value of food, lodging, clothing, and other noncash items you give your household employee. However, cash you give your employee in place of these items is included in cash wages. State disability payments treated as wages. Certain state disability plan payments that your household employee may receive are treated as social security and Medicare wages. For more information about these payments, see the instructions for Schedule H (Form 1040), Household Employment Taxes, and the notice issued by the state.
Wages not counted. Do not count wages you pay to any of the following individuals as social security and Medicare wages, even if these wages are $1,400 or more during the year.
Also, if your employee's cash wages reach $87,000 in 2003, do not count any wages you pay that employee during the rest of the year as social security wages to figure social security tax. (But continue to count the employee's cash wages as Medicare wages to figure Medicare tax.) If you reimburse your employee for the amount paid for transit passes used to commute to your home, do not count the reimbursement (up to $100 per month for 2002) as wages. See Publication 15-B, Employer's Tax Guide to Fringe Benefits, for the 2003 amount. A transit pass includes any pass, token, farecard, voucher, or similar item entitling a person to ride on mass transit, such as a bus or train. If you reimburse your employee for the amount paid for parking at or near your home or at or near a location from which your employee commutes to your home, do not count reimbursement (up to $185 per month for 2002) as wages. See Publication 15-B for the 2003 amount. Withholding the employee's share. You should withhold the employee's share of social security and Medicare taxes if you expect to pay your household employee cash wages of $1,400 or more in 2003. However, if you prefer to pay the employee's share yourself, see Not withholding the employee's share, next. You can withhold the employee's share of the taxes even if you are not sure your employee's cash wages will be $1,400 or more in 2003. If you withhold the taxes but then actually pay the employee less than $1,400 in cash wages for the year, you should repay the employee. Withhold 7.65% (6.2% for social security tax and 1.45% for Medicare tax) from each payment of social security and Medicare wages. You can use Table 3, later, to figure the proper amount to withhold. You will pay the amount withheld to the IRS with a matching amount for your share of the taxes. Do not withhold any social security tax after your employee's social security wages for the year reach $87,000. If you make an error by withholding too little, you should withhold additional taxes from a later payment. If you withhold too much, you should repay the employee. Example. You hire a household employee (who is an unrelated individual over age 18) to care for your child and agree to pay cash wages of $100 every Friday. You expect to pay your employee $1,400 or more for the year. You should withhold $7.65 from each $100 wage payment and pay your employee the remaining $92.35. The $7.65 is the sum of $6.20 ($100 × 6.2%) for your employee's share of social security tax and $1.45 ($100 × 1.45%) for your employee's share of Medicare tax. Match the $7.65 you withhold with $7.65 from your own funds when you pay the taxes. Not withholding the employee's share. If you prefer to pay your employee's social security and Medicare taxes from your own funds, you do not have to withhold them from your employee's wages. The social security and Medicare taxes you pay to cover your employee's share must be included in the employee's wages for income tax purposes. However, they are not counted as social security and Medicare wages or as federal unemployment (FUTA) wages. Example. You hire a household employee (who is an unrelated individual over age 18) to care for your child and agree to pay cash wages of $100 every Friday. You expect to pay your employee $1,400 or more for the year. You decide to pay your employee's share of social security and Medicare taxes from your own funds. You pay your employee $100 every Friday without withholding any social security or Medicare taxes. For social security and Medicare tax purposes, your employee's wages each payday are $100. For each wage payment, you will pay $15.30 when you pay the taxes. This is $7.65 ($6.20 for social security tax + $1.45 for Medicare tax) to cover your employee's share plus a matching $7.65 for your share. For income tax purposes, your employee's wages each payday are $107.65 ($100 + the $7.65 you will pay to cover your employee's share of social security and Medicare taxes). - Continue - |
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You also can
visit the INS web site at 
If you do not
need to pay social security, Medicare, or federal unemployment tax and do not choose to
withhold federal income tax, read State employment taxes, next. The rest of this
publication does not apply to you. ![[ ]](../pixs/squ.gif){kind=small}
Find out if the person can legally work in the United
States.