How to Report Household Employee Income: Schedule H and W-2

To report income paid to a household employee, you file Schedule H with your personal Form 1040 and give the worker a Form W-2. Schedule H covers the Social Security, Medicare, federal unemployment, and any income taxes tied to that worker; the W-2 shows the same wages and withholding to the employee and the Social Security Administration. The obligation kicks in once cash wages to a single worker reach $3,000 in 2026, or once total household wages hit $1,000 in any calendar quarter.¹

When Reporting Is Required

Two separate thresholds decide what you owe and report.

The first is the Social Security and Medicare (FICA) threshold. If you pay any one household employee $3,000 or more in cash wages during 2026, all of those wages, starting from the first dollar, are subject to FICA.² The test runs per employee, so paying one nanny $3,000 and a housekeeper $1,500 pulls only the nanny’s wages in. The combined rate is 15.3% (12.4% Social Security plus 2.9% Medicare), split evenly between you and the worker at 7.65% each.³ You can pay the employee’s share yourself instead of withholding it, but that amount then becomes taxable income on their W-2. Social Security tax stops at the 2026 wage base of $184,500.⁴ An extra 0.9% Medicare tax applies to any wages you pay a single employee above $200,000.¹

The second is federal unemployment tax (FUTA). If total cash wages to all household employees combined reach $1,000 or more in any calendar quarter of the current or prior year, you owe FUTA.⁵ The rate is 6% of the first $7,000 in wages per employee, and it comes entirely out of your pocket. Paying state unemployment taxes on time earns a credit of up to 5.4%, dropping the effective federal rate to 0.6%, or a maximum of $42 per worker per year.⁶

Federal income tax withholding is optional. You aren’t required to withhold it, but if your employee asks you to and you agree, they fill out a Form W-4 and you withhold the same way an ordinary employer would.⁷

Family Members Who Don’t Count

Some workers in your home never trigger these taxes, no matter how much you pay them. Wages to your spouse, your child under 21, and any worker under 18 whose main occupation isn’t household work are exempt from Social Security, Medicare, and FUTA. Wages to your parent are exempt from FUTA, and exempt from FICA too unless your parent is caring for your child under 18 and you’re divorced, widowed, or living with a spouse who can’t care for the child.⁷ The wages are still taxable income to the worker even when these exemptions apply.

Set Up Before You Pay

You need a federal Employer Identification Number before you can file any of the household employment forms. The IRS issues one immediately through its online application at no cost, and you can also apply by mail or fax using Form SS-4.⁸⁹ The EIN is a nine-digit number that identifies you as an employer on tax forms and is separate from your Social Security number.

From the employee, collect:

A completed Form I-9 verifying identity and work authorization. Section 1 is due no later than the employee’s first day of work.¹⁰
Their Social Security number, needed for the W-2 at year-end.
A Form W-4, only if you’ve agreed to withhold federal income tax.

Keep payroll records, copies of W-2s, and the I-9 and any W-4 for at least four years after the tax is due or paid, whichever is later.¹¹

Year-End: W-2 and Schedule H

Form W-2 for the Employee

Give your worker a completed Form W-2 by January 31 following the year of the wages.¹² For 2026 wages, that deadline lands on a weekend, so it shifts to Monday, February 1, 2027. Cash wages go in box 1, Social Security wages in box 3, and Medicare wages in box 5, along with the taxes withheld from each.

Copy A of the W-2 goes to the Social Security Administration by the same deadline. Paper filers attach Form W-3 as a cover sheet summarizing the W-2s.¹³ If you use the SSA’s Business Services Online portal to file electronically, W-3 isn’t required.

Schedule H With Your 1040

Schedule H is where you actually report the wages and calculate what you owe the IRS. You attach it to your personal Form 1040. The form runs you through the FICA calculation (12.4% plus 2.9% of cash wages), any income tax you withheld, and the FUTA amount.¹⁴ The total flows into your 1040 and is paid with your regular tax return. Household employers file once a year and are not required to make separate federal tax deposits during the year.¹⁵

If you don’t otherwise have to file a tax return, you can still file Schedule H on its own to report and pay the household employment taxes.¹

Paying the Tax During the Year

Even though Schedule H is annual, the IRS expects the money in during the year, and an underpayment can trigger a penalty. Two ways to handle it:

If you have a job of your own, submit a new W-4 to your employer and have extra federal tax withheld to cover the household tax bill. That’s usually the simplest option.
Send quarterly estimated payments using Form 1040-ES. The due dates are generally April 15, June 15, September 15, and January 15.¹⁶

Either approach satisfies the prepayment requirement. If your total prepayments come up short, the IRS charges a penalty on the underpaid balance.¹⁷

Penalties If Something Goes Wrong

Missing the tax payment on time draws a failure-to-pay penalty of 0.5% of the unpaid balance for each month or partial month it’s late, capped at 25%, plus daily interest.¹⁸

Late or missing W-2s carry their own penalties, and they apply per form and separately for the copy that goes to the SSA and the copy that goes to the employee. For 2026, the amounts run from $60 per form for up to 30 days late, to $130 through August 1, to $340 after August 1 or never filed, and $680 for intentional disregard.¹⁹

Treating a household employee as an independent contractor to sidestep withholding is the costliest mistake. If the IRS decides the worker was really an employee, you’re on the hook for the employment taxes you should have paid, plus penalties and interest, and no relief provision applies when there’s no reasonable basis for the classification.²⁰ Workers you direct in your own home, whose schedule and methods you control, are almost always employees under the IRS “right to control” standard, even when a placement agency introduced you.²¹

1
Internal Revenue Service. Topic No. 756, Employment Taxes for Household Employees
2
Social Security Administration. Employment Coverage Thresholds
3
Internal Revenue Service. Topic No. 751, Social Security and Medicare Withholding Rates
4
Social Security Administration. Contribution and Benefit Base
5
Employment & Training Administration – U.S. Department of Labor. Unemployment Insurance Tax Topic
6
Internal Revenue Service. FUTA Credit Reduction
7
Internal Revenue Service. Publication 926 (2026), Household Employer’s Tax Guide
8
Internal Revenue Service. Get an Employer Identification Number
9
Internal Revenue Service. About Form SS-4, Application for Employer Identification Number (EIN)
10
U.S. Citizenship and Immigration Services. I-9, Employment Eligibility Verification
11
Internal Revenue Service. How Long Should I Keep Records?
12
Social Security Administration. Deadline Dates to File W-2s
13
Internal Revenue Service. Form W-3 Transmittal of Wage and Tax Statements
14
Internal Revenue Service. 2025 Schedule H (Form 1040)
15
Office of the Law Revision Counsel. 26 USC 3510 – Coordination of Collection of Domestic Service Employment Taxes With Collection of Income Taxes
16
Internal Revenue Service. About Form 1040-ES, Estimated Tax for Individuals
17
Internal Revenue Service. 2026 Form 1040-ES Estimated Tax for Individuals
18
Internal Revenue Service. Failure to Pay Penalty
19
Internal Revenue Service. Information Return Penalties
20
Internal Revenue Service. Independent Contractor (Self-Employed) or Employee?
21
Internal Revenue Service. Hiring Household Employees