🏠 Understanding Schedule H — A Complete Guide for Household Employers in 2025
If you hire a nanny, housekeeper, caregiver, or cleaning helper directly to work in your home, the IRS may classify you as a Household Employer.
In that case, you are responsible for reporting and paying Social Security & Medicare taxes (FICA) and Federal Unemployment Tax (FUTA) using Schedule H.
This guide also explains two of the most confusing issues for taxpayers: Do household employers need to file Form 940? and What if I paid wages through payroll every quarter? All explanations are based on the latest 2025 IRS rules.
1️⃣ When You Must File Schedule H
Under IRS rules for 2025, you must file Schedule H with your Form 1040 if any of the following apply:
1) You paid $2,900 or more in cash wages to any one household employee → FICA applies
2) You paid $1,000 or more in cash wages in any calendar quarter to all household employees combined → FUTA applies
3) You controlled what work was done and how it was done (schedule, location, methods) → the worker is an employee, not a contractor
Independent Contractor vs. Employee
A household worker is not a contractor simply because you pay them in cash or they work part-time.
If you control their work, the IRS almost always classifies them as an employee.
2️⃣ What Taxes Household Employers Must Pay
Schedule H is used to calculate and report all federal employment taxes for household workers.
✔ Social Security Tax: employer 6.2% + employee 6.2%
✔ Medicare Tax: employer 1.45% + employee 1.45%
✔ FUTA Tax: 6.0% basic rate → usually reduced to 0.6% with state credit
FUTA Wage Base: First $7,000 of wages per employee per year
FUTA Filing Threshold: $1,000 or more wages in any quarter
3️⃣ Schedule H Example Calculation
Assume Ms. H hired a nanny in 2025 and paid her $6,000 for the year.
① FICA Requirement
Because wages exceeded the $2,900 threshold, FICA applies.
Employee FICA (7.65%): $459
Employer FICA (7.65%): $459
② FUTA Requirement
FUTA applies because she paid more than $1,000 in a quarter.
Only the first $7,000 of wages per employee is taxable → entire $6,000 is taxable.
FUTA (0.6% effective rate): $36
③ Total Employer Taxes
Employer FICA: $459
FUTA: $36
Total: $495
▶ How It Is Reported
Ms. H files Schedule H with her Form 1040 and pays the total $495 with her tax return.
4️⃣ Do Household Employers Need to File Form 940?
✔ Household employment is not business employment
✔ FUTA for household employees is always reported on Schedule H, not Form 940
✔ Having an EIN does not create a Form 940 filing requirement (an EIN is optional and mainly for issuing W-2s)
Exception — When Form 940 IS required:
If the taxpayer is also a business employer and has business employees,
then business FUTA is filed on Form 940, while household FUTA remains on Schedule H.
Summary:
Household employment only → Form 940 = NO
Schedule H only → YES
5️⃣ What If You Paid Wages Through Quarterly Payroll?
Many taxpayers assume that paying wages through a payroll company means they must file Form 941 or Form 940.
However, IRS rules focus on the type of employment, not the frequency of payroll.
✔ Weekly, bi-weekly, or quarterly payroll does NOT make you a business employer
✔ Household wages → still reported only on Schedule H
✔ No Form 941 filing
✔ No Form 940 filing
⚠️ Important Warning:
Some payroll companies mistakenly file Form 941/940 for household employers.
This can cause IRS account mismatches.
Always instruct the payroll provider to treat you as a Household Employer.
Summary:
→ Business employer = Forms 940 & 941
→ Household employer = Schedule H only
→ Payroll frequency does not change the filing category
6️⃣ EA Practitioner Tips — Common IRS Issues
1) “They’re a student so they’re a contractor” — IRS rejects this almost every time for household work.
2) Cash wages are still wages — lack of documentation increases audit risk.
3) Filing Schedule H one year may prompt IRS to ask about later years.
4) Most household employers must issue a W-2; deadline is January 31.
5) Having an EIN helps with W-2 filing, but does NOT create a Form 940 requirement.