U.S. Individual Income Tax Return

2007 Instructions for Schedule H (Form 1040)

Purpose: This is the first circulated draft of the Instructions for Schedule H (Form
1040). See below for a discussion of the major changes.
TPCC Meeting: None, but one may be arranged if requested.
Prior Version: The 2006 Instructions for Schedule H (Form 1040) is available at:
http://www.irs.gov/pub/irs-pdf/i1040sh.pdf
Form: The 2007 Schedule H (Form 1040) was circulated earlier at
http://taxforms.web.irs.gov/Products/Drafts/2007-2/07F1040schH_d1.pdf
Other Products: Circulations of draft tax forms, instructions, notices, and publications
are posted at: http://taxforms.web.irs.gov/Draft_products.html
Comments: Please email, fax, or call with any comments to the TLS shown below by
August 31, 2007.

Yvette Lawrence
Tax Law Specialist
SE:W:CAR:MP:T:B:C
Email: [email protected]
Phone: 202-622-3776 VMS
Fax: 202-622-5004

Major Changes
The U.S. Department of Labor (DOL) informed IRS that there may potentially be 1 credit
reduction state for 2007. A final determination will not be made until November 2007.
Employers in a credit reduction state pay higher FUTA taxes because they must reduce
their maximum state credit.
Page H-1:
• We added a statement specifically for employers in a credit reduction state to
direct them to page H-5 of the instructions.
Page H-2:
• Under “Reminder”, we added a statement to encourage electronic filing and a
reference to the website for Social Security Administration.
• In column 2, “TIP”, we updated the amount for monthly transit pass benefits
to $110 per Rev. Proc. 2006-53.

Page H-4:
• The references to the limit on wages subject to the social security tax for
2007 were revised to reflect the $97,500 threshold per Notice 2006-102.
Page H-5:
• We added a worksheet below the instruction for “line 24” to assist employers
in a credit reduction state in calculating the reduced amount of FUTA tax
credit. Percentage amounts for the reduction will be provided by Chief
Counsel.
Page H-6:
• Under “What’s New for 2008”, “TIP”, we added a statement informing
employers that the FUTA rate will change from 6.2% to 6.0% effective for
calendar years after December 31, 2007. IRC 3301(2). S. 1861 has been
introduced in the Senate, and has provisions relating to Federal
Unemployment tax.
• We added a new topic to address transportation (commuting) benefits for
2008.
• In the “Caution”, we revised the text for accuracy and inserted the due dates
for estimated tax payments.
General:
• Placeholders (“XXXX”) have been used for references that are subject to
change before we got to print. These include references to credit reduction
states and an increase to wages subject to social security tax for 2007.
• All filing deadlines were updated as appropriate.
• Graphics were updated to reflect current year tax forms or current drafts.
• On page 10, we updated the states’ contact information as provided by DOL.
• Filing addresses listed on page H-11 will be updated to reflect current
processing center addresses and state assignments. We will monitor and
verify all addresses prior to going to print.

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Page 1 of 11 of 2007 Instructions for Schedule H (Form 1040)

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Department of the Treasury
Internal Revenue Service

2007 Instructions for Schedule H (Form 1040)
Household Employment Taxes
Household
Employers

Here is a list of forms you need to complete:
• Schedule H for figuring your household employment taxes.
• Form W-2 for reporting wages paid to your employees.
• Form W-3 for sending Copy A of Form W-2 to the Social Security Administration.
For more information, see What Forms Must I File? in Pub. 926, Household Employer’s
Tax Guide.
No household employees in 2007? If you did not have any household employees in 2007,
you do not have to file Schedule H (Form 1040) for 2007.
XXXX State employer? If yes, you must use the worksheet on page H-5.

We have been asked:
What do I do after I fill in Schedule H? Enter the taxes from Schedule H on the “Household
employment taxes” line of your Form 1040, 1040NR, 1040-SS, or 1041. You do this because
these taxes are added to your income taxes.
How do I file Schedule H? File Schedule H with your Form 1040, 1040NR, 1040-SS, or

1041. If you are not filing a 2007 tax return, file Schedule H by itself.
Do I make a separate payment? No. You pay all the taxes to the United States Treasury,

even the social security taxes.
When do I pay? Most filers must pay by April 15, 2008.
How many copies of Form W-3 do I send to the Social Security Administration (SSA)?

Send one copy of Form W-3 with Copy A of Form(s) W-2 to the SSA, and keep one copy of
Form W-3 for your records.

Contents

Page

Contents

Page

Form W-2 and Form W-3 . . . . . . . . . . . . . . . H-5
The Basics . . . . . . . . . . . . . . . . . . . . . . . . . . H-2
Who Needs To File Schedule H? . . . . . .
Who Needs To File Form W-2 and Form
W-3? . . . . . . . . . . . . . . . . . . . . . . . . .
Do You Have an Employer Identification
Number (EIN)? . . . . . . . . . . . . . . . . . .
Can Your Employee Legally Work in the
United States? . . . . . . . . . . . . . . . . . .
What About State Employment Taxes? . .

You Should Also Know . . . . . . . . . . . . . . . . . H-6

. . . . H-2

What’s New for 2008 . . . . . . . . . . . . . . .
Estimated Tax Penalty . . . . . . . . . . . . . . .
What Records To Keep . . . . . . . . . . . . . .
What Is the Earned Income Credit (EIC)? .
Rules for Business Employers . . . . . . . . .
State Disability Payments . . . . . . . . . . . .
How To Get Forms and Publications . . . .
Privacy Act and Paperwork Reduction Act
Notice . . . . . . . . . . . . . . . . . . . . . . . . .

. . . . H-2
. . . . H-2
. . . . H-2
. . . . H-3

When and Where To File . . . . . . . . . . . . . . . H-3
Schedule H . . . . . . . . . . . . . . . . . . . . . . . . . H-3
Form W-2 and Form W-3 . . . . . . . . . . . . . . . H-3

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. H-6
. H-6
. H-6
. H-6
. H-6
. H-6
. H-7

. . . H-7

Completed Example of Schedule H, Form
W-2, and Form W-3 . . . . . . . . . . . . . . . . . H-7

How To Fill In Schedule H, Form W-2, and
Form W-3 . . . . . . . . . . . . . . . . . . . . . . . . . H-3

Contact List for State Unemployment Tax
Agencies . . . . . . . . . . . . . . . . . . . . . . . . . H-10

Schedule H . . . . . . . . . . . . . . . . . . . . . . . . . H-3

H-1
Cat. No. 21451X

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Cash wages. Cash wages include wages paid by checks, money

Important Dates!
By . . . . . . . . . . . . .

You must . . . . . . . . . . . . . . . . . . .

January 31, 2008

Give your employee Form W-2.

February 29, 2008
(March 31, 2008, if
you file
electronically)

Send Copy A of Form W-2 with
Form W-3 to the Social Security
Administration.

April 15, 2008 (see
page H-3 for
exceptions)

File Schedule H and pay your
household employment taxes with
your 2007 tax return.

orders, etc. Cash wages do not include the value of food, lodging,
clothing, or other noncash items you give a household employee.

For 2007, you can generally give your employee transportation benefits such as transit passes worth up to
$110 per month without the benefits counting as cash
wages. However, the value of benefits over $110 a
month is included as wages. See Transportation (Commuting) Benefits in Pub. 15-B, Employer’s Tax Guide to Fringe Benefits, for
more information.

TIP

Calendar quarter. A calendar quarter is January through March,

April through June, July through September, or October through
December.
Workers who are not your employees. Workers you get from an

agency are not your employees if the agency is responsible for who
does the work and how it is done. Self-employed workers are also
not your employees. A worker is self-employed if only he or she
can control how the work is done. A self-employed worker usually
provides his or her own tools and offers services to the general
public in an independent business.
Example. You made an agreement with Paul Brown to care for
your lawn. Paul runs a lawn care business and offers his services to
the general public. He hires his own helpers and provides his own
tools and supplies. Neither Paul nor his helpers are your employees.

The Basics
Reminder
If you must file a 2007 Form W-2, Wage and Tax Statement, for
any household employee, you must also send Form W-3, Transmittal of Wage and Tax Statement, with Copy A of Form(s) W-2 to the
Social Security Administration. You are encouraged to file your
Forms W-2 and W-3 electronically. Visit the Social Security website at www.socialsecurity.gov/employer/ to learn about electronic
filing.

For more information, see Pub. 926, Household Employer’s
Tax Guide.

Who Needs To File Form W-2 and
Form W-3?

Who Needs To File Schedule H?

You must file Form W-2 for each household employee to whom
you paid $1,500 or more of cash wages in 2007 that are subject to
social security and Medicare taxes. To find out if the wages are
subject to these taxes, see the instructions for Schedule H, lines 1
and 3, on page H-4. If the wages are not subject to these taxes but
you withheld federal income tax from the wages of any household
employee, you must file Form W-2 for that employee.

You must file Schedule H (Form 1040) if you answer “Yes” to any
of the questions on lines A, B, or C.
Only 8 lines for most people. Depending on your answers, you may

find that you only have to complete lines A, 1 through 4, 6, 8, and 9.
Did you have a household employee? If you hired someone to do

household work and you were able to control what work he or she
did and how he or she did it, you had a household employee. This is
true even if you gave the employee freedom of action. What matters
is that you had the right to control the details of how the work was
done.

If you file one or more Forms W-2, you must also file
Form W-3.

Do You Have an Employer
Identification Number (EIN)?

Example. You paid Betty Oak to babysit your child and do light
housework 4 days a week in your home. Betty followed your
specific instructions about household and child care duties. You
provided the household equipment and supplies Betty needed to do
her work. Betty is your household employee.

If you do not have an EIN, see Form SS-4, Application for Employer Identification Number. The instructions explain how you
can get an EIN immediately over the internet, by telephone, or in
about 4 weeks if you apply by mail. See How To Get Forms and
Publications on page H-7 for details on how to get forms and
publications including Form SS-4. Do not use a social security
number in place of an EIN.

Household work is work done in or around your home. Some
examples of workers who do household work are:

Babysitters
Caretakers
Cleaning people

Drivers
Health aides
Housekeepers

Nannies
Private nurses
Yard workers

Can Your Employee Legally Work in
the United States?

If a worker is your employee, it does not matter whether the
work is full or part-time or that you hired the worker through an
agency or from a list provided by an agency or association. Also, it
does not matter if the wages paid are for work done hourly, daily,
weekly, or by the job.

It is unlawful to employ an alien who cannot 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 each complete
part of the U.S. Citizenship and Immigration Services (USCIS)
Form I-9, Employment Eligibility Verification. The Bureau was
formerly called the Immigration and Naturalization Service, or INS.

Note. If a government agency files Schedule H for the worker, you
do not need to file it.

H-2

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You must verify that the employee is either a U.S. citizen or an alien
who can legally work and you must keep Form I-9 for your records.
You can get the form and the USCIS Handbook for Employers by
calling 1-800-870-3676, or by visiting the USCIS website at
www.uscis.gov.

Social Security Administration
Data Operations Center
Wilkes-Barre, PA 18769-0001
For certified mail, the ZIP code is 18769-0002. If you use a carrier
other than the U.S. Postal Service, add “ATTN: W-2 Process, 1150
E. Mountain Dr.” to the address and change the ZIP code to
“18702-7997.”

What About State Employment
Taxes?

For additional information, visit the website for Social Security
at www.socialsecurity.gov/employer/whereto.htm.

If you employed a household employee in 2007, you probably have
to pay contributions to your state unemployment fund for 2007. To
find out if you do, contact your state unemployment tax agency
right away. See page H-10 for some helpful contact information for
each state. You should also find out if you need to pay or collect
other state employment taxes or carry workers’compensation insurance.

Note. Check with your state, city, or local tax department to find
out if you must send Copy 1 of Form W-2 and where to file Copy 1.
Penalties. You may have to pay a penalty if you do not give Forms
W-2 to your employees or file Copy A of the forms with the SSA by
the due dates shown above. You may also have to pay a penalty if
you do not show your employee’s social security number on Form
W-2 or do not provide correct information on the form.

See the Appendix in Pub. 926 for a complete listing of contact
information for state unemployment tax agencies.

How To Fill In Schedule H, Form
W-2, and Form W-3

When and Where To File
Schedule H

Schedule H

If you file Forms 1040, 1040NR, 1040-SS, or 1041 for 2007,
remember to attach Schedule H to it. Mail your return by April 15,
2008, to the address shown in your tax return booklet.

!

CAUTION

Exceptions. If you get an extension of time to file your return, file
it with Schedule H by the extended due date. If you are a fiscal year
filer, file your return and Schedule H by the due date of your fiscal
year return, including extensions.

If you were notified that your household employee received payments from a state disability plan, see page
H-6.

Social security number. Enter your social security number. (Form
1041 filers, do not enter a number in this space. But be sure to enter
your EIN in the space provided.)

Note. If you are a calendar year taxpayer and have no household
employees for 2007, you do not have to file Schedule H (Form
1040) for 2007.

Employer identification number (EIN). An EIN is a nine-digit
number assigned by the IRS. The digits are arranged as follows:
00-0000000. Enter your EIN in the space provided. If you do not
have an EIN, see Do You Have an Employer Identification Number
(EIN)? earlier. If you applied for an EIN but have not received it,
enter “Applied For.” Do not use your social security number as an
EIN.

If you are not required to file a 2007 tax return (for example,
because your income is below the amount that requires you to file),
you must file Schedule H by April 15, 2008. Complete Schedule H
and put it in an envelope with your check or money order. Do not
send cash. See the list of filing addresses on page H-11. Mail your
completed Schedule H and payment to the address listed for the
place where you live. Make your check or money order payable to
the “United States Treasury” for the total household employment
taxes due. Enter your name, address, social security number, daytime phone number, and “2007 Schedule H” on your check or
money order. Household employers that are tax-exempt, such as
churches, may also file Schedule H by itself.

Line A. To figure the total cash wages you paid in 2007 to each
household employee, do not count amounts paid to any of the
following individuals.
• Your spouse.
• Your child who was under age 21.
• Your parent. (See Exception for parents on page H-4.)
• Your employee who was under age 18 at any time during
2007. If the employee was not a student, see Exception for employees under age 18 below.

Form W-2 and Form W-3

Exception for parents. Count the cash wages you paid your
parent for work in or around your home if both 1 and 2 below apply.

By January 31, 2008, you must give Copies B, C, and 2 of Form
W-2 to each employee. You will meet this requirement if the form
is properly addressed, mailed, and postmarked no later than
January 31, 2008.

1. Your child who lived with you was under age 18 or had a
physical or mental condition that required the personal care of an
adult for at least 4 continuous weeks in a calendar quarter.
2. You were divorced and not remarried, a widow or widower,
or married to and living with a person whose physical or mental
condition prevented him or her from caring for the child during that
4-week period.

By February 29, 2008, (March 31, 2008, if you file electronically) send Copy A of all Forms W-2 with Form W-3 to the Social
Security Administration (SSA). Mail Copy A of all Forms W-2
with Form W-3 to:

H-3

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Exception for employees under age 18. Count the cash wages
you paid to a person who was under age 18 and not a student if
providing household services was his or her principal occupation.

If you do not file any of the above forms, complete Part IV of
Schedule H and follow the instructions under When and Where To
File on page H-3.

Part I. Social Security, Medicare, and Income
Taxes

Part II. Federal Unemployment (FUTA) Tax
FUTA tax, with state unemployment systems, provides for payments of unemployment compensation to workers who have lost
their jobs. Most employers pay both a federal and state unemployment tax.

Social security and Medicare taxes pay for retirement, disability,
and health benefits for workers and their families. You and your
employees pay these taxes in equal amounts.
For social security, the tax rate is 6.2% each for you and your
employee. For Medicare, the rate is 1.45% each. For 2007, the limit
on wages subject to social security tax is $97,500. There is no limit
on wages subject to the Medicare tax. If you did not deduct the
employee’s share from his or her wages, you must pay the
employee’s share and your share (a total of 12.4% for social security and 2.9% for Medicare). See Form W-2 and Form W-3 on page
H-5 for more information.
$1,500 test. Any household employee to whom you paid cash
wages of $1,500 or more in 2007 meets this test. The test applies to
cash wages paid in 2007 regardless of when the wages were earned.
See Pub. 926 for more information. Or, visit the website for Social
Security at www.ssa.gov/pubs/10021.html.

The FUTA tax rate is 6.2%. But see Credit for contributions paid
to state below. Do not deduct the FUTA tax from your employee’s
wages. You must pay it from your own funds. See page H-10 for a
listing of some helpful contact information for each state.
Credit for contributions paid to state. You may be able to take a
credit of up to 5.4% against the FUTA tax, resulting in a net tax rate
of 0.8%. But to do so, you must pay all the required contributions
for 2007 to your state unemployment fund by April 15, 2008. Fiscal
year filers must pay all required contributions for 2007 by the due
date of their federal income tax returns (not including extensions).

Contributions are payments that a state requires you, as an
employer, to make to its unemployment fund for the payment of
unemployment benefits. However, contributions do not include:
• Any payment such as FUTA tax deducted or deductible from
your employees’ pay;
• Penalties, interest, or special administrative taxes not included
in the contributions rate the state gave you; and
• Voluntary contributions you paid to get a lower experience
rate.

Line 1. Enter on line 1 the total of cash wages (see Cash wages on
page H-2) paid in 2007 to each household employee who meets the
$1,500 test, explained above.

!

CAUTION

If you paid any household employee cash wages of
more than $97,500 in 2007, include on line 1 only the
first $97,500 of that employee’s cash wages.

Lines 10 through 12. Answer the questions on lines 10 through 12

to see if you should complete Section A or Section B of Part II.
Fiscal year filers. If you paid all state unemployment contributions for 2007 by the due date of your return (not including extensions), check the “Yes” box on line 11. Check the “No” box if you
did not pay all of your state contributions by the due date of your
return.

Line 2. Multiply the amount on line 1 by 12.4% (.124) and enter the

result on line 2.
Line 3. Enter on line 3 the total of cash wages (see Cash wages on

page H-2) paid to each employee in 2007.
Line 4. Multiply the amount on line 3 by 2.9% (.029) and enter the
result on line 4.

Line 13. Enter the two-letter abbreviation of the name of the state

(or the District of Columbia, Puerto Rico, or the Virgin Islands) to
which you paid unemployment contributions.

Lines 5. Enter on line 5 any federal income tax you withheld from

the wages you paid your household employees in 2007.

Line 14. Enter your state reporting number. If you do not have one,

Line 6. Add lines 2, 4, and 5 and enter the result on line 6.

contact your state’s unemployment tax agency. See the Appendix in
Pub. 926 for your state’s contact information.

Line 7. Enter on line 7, any advance EIC payments you made to

your household employees in 2007.

Line 15. Enter the total of contributions (defined earlier) you paid
to your state unemployment fund for 2007. If you did not have to
make contributions because your state gave you a zero percent
experience rate, enter “0% rate” on line 15.

Line 8. Subtract the amount on line 7 from the amount on line 6 and

enter the result on line 8.
Line 9. Add the cash wages you paid to all your household employ-

Line 16. Enter the total of cash wages (see Cash wages on page
H-2) you paid in 2007 to each household employee, including
employees paid less than $1,000. However, do not include cash
wages paid in 2007 to any of the following individuals.
• Your spouse.
• Your child who was under age 21.
• Your parent.

ees for each calendar quarter of 2006 and 2007. Is the total for any
quarter in 2006 or 2007 $1,000 or more?
Yes. Complete Part II of Schedule H.
No. Follow the instructions in the chart below.
If you file
Form. . .

Then enter the amount from
Schedule H, line 8, on. . .

1040

line 62

1040NR

line 57

1040-SS

Part I, line 4

1041

Schedule G, line 6

If you paid any household employee more than $7,000 in 2007,
include on line 16 only the first $7,000 of that employee’s cash
wages.

!

CAUTION

H-4

Complete lines 18 through 25 only if you checked a
“No” box on lines 10, 11, or 12.

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Line 18. Complete all columns that apply. If you do not, you will

Part III. Total Household Employment Taxes

not get a credit. If you need more space, attach a statement using the
same format as line 18. Your state will provide the experience rate.
If you do not know your rate, contact your state unemployment tax
agency. See page H-10 for a listing of some helpful contact information for each state.

Line 28. Follow the instructions in the chart below.

You must complete columns (a), (b), (c), and (i), even if you
were not given an experience rate. If you were given an experience
rate of 5.4% or higher, you must also complete columns (d) and (e).
If you were given a rate of less than 5.4%, you must complete all
columns.
If you were given a rate for only part of the year, or the rate
changed during the year, you must complete a separate line for each
rate period.
Column (c). Enter the taxable wages on which you must pay
taxes to the unemployment fund of the state shown in column (a). If
your experience rate is zero percent, enter the amount of wages you
would have had to pay taxes on if that rate had not been granted.
Column (i). Enter the total of contributions (defined earlier) you
paid to the state unemployment fund for 2007 by April 15, 2008.
Fiscal year filers, enter the total contributions you paid to the state
unemployment fund for 2007 by the due date of your return (not
including extensions). If you are claiming excess credits as payments of state unemployment contributions, attach a copy of the
letter from your state.

If you file
Form. . .

Then do not complete Part IV but
enter the amount from Schedule
H, line 27, on . . .

1040

line 62

1040NR

line 57

1040-SS

Part I, line 4

1041

Schedule G, line 6

If you do not file any of the above forms, complete Part IV of
Schedule H and follow the instructions under When and Where To
File on page H-3.

Form W-2 and Form W-3
If you file Form W-2, you must also file Form W-3.
You must report both cash and noncash wages in box 1, as well
as tips and other compensation. The completed Forms W-2 and
W-3 in the example (see page H-9) show how the entries are made.
Employee’s portion of taxes paid by employer. If you paid all of
your employee’s share of social security and Medicare taxes, without deducting them from the employee, follow steps 1 through 3.
(See the example on pages H-7, H-8, and H-9.)

Line 19. Add the amounts in columns (h) and (i) separately and
enter the totals in the spaces provided.
Line 20. Add the amounts shown on line 19 and enter the total on

1. Enter the amount you paid on your employee’s behalf in
boxes 4 and 6 (do not include your share of these taxes).
2. Add the amounts in boxes 3, 4, and 6. (However, if box 5 is
greater than box 3, then add the amounts in boxes 4, 5, and 6.)
3. Enter the total in box 1.

line 20.
Line 24. Complete the worksheet below only if you are a XXXXX
State employer.
Line 26. Enter the amount from line 8. If there is no entry on line 8,

enter -0-.
Line 27. Add the amounts on lines 17 and 26. (If you were required

TIP

to complete Section B, add the amounts on lines 25 and 26 and enter
the total on line 27.)

On Form W-3, put an “X” in the “Hshld. emp.” box
located in box b, Kind of Payer.

Keep for Your Records

Worksheet for XXXXX State Employers —Line 24

1. Enter the smaller of the amounts from Schedule H, line 20 or 23. . . . . . . . . . . . . . . . . . . . 1.
2. Enter your XXXXXX wages from Schedule H, line 21 . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.
3. Multiply the amount from line 2 of this worksheet by .xxx and enter the result here. . . . . . 3.
4. Subtract line 3 of this worksheet from line 1 of this worksheet and enter the result here and
on Schedule H, line 24. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.

H-5

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What Is the Earned Income Credit
(EIC)?

You Should Also Know

The EIC is a refundable tax credit for certain workers.

What’s New for 2008

Which employees must I notify about the EIC? You must notify

The tax rates mentioned in the instructions for Part I of
Schedule H will not change. The FUTA tax rate menTIP
tioned in Part II will change from 6.2% to 6.0% effective for calendar years after December 31, 2007. The
cash wage threshold that you pay to any one household employee
will be $X,XXX for 2008. The 2008 Employee Social Security and
Medicare Tax Withholding Table is in Pub. 926, Household
Employer’s Tax Guide.

your household employee about the EIC if you agreed to withhold
federal income tax from the employee’s wages but did not do so
because the income tax withholding tables showed that no tax
should be withheld.
Note. You are encouraged to notify each employee whose wages

for 2007 were less than $37,783 ($39,783 if married filing jointly)
that he or she may be eligible for the EIC.
How and when must I notify my employees? You must give the

Limit on wages subject to social security tax. The $97,500 amount

employee one of the following:
• The official IRS Form W-2, that has the required information
about the EIC on the back of Copy B.
• A substitute Form W-2 with the same EIC information on the
back of the employee’s copy that is on Copy B of the official IRS
Form W-2.
• Notice 797, Possible Federal Tax Refund Due to the Earned
Income Credit (EIC).
• Your written statement with the same wording as Notice 797.

in the instructions for Part I of Schedule H will increase to
$XX,XXX.
Transportation (commuting) benefits. The monthly exclusion for
commuter highway vehicle transportation and transit passes increases to $XXX.

Estimated Tax Penalty
You may need to increase the federal income tax withheld from
your pay, pension, annuity, etc. or make estimated tax payments to
avoid an estimated tax penalty based on your household employment taxes shown on line 27 of Schedule H (Form 1040). You may
increase your federal income tax withheld by filing a new Form
W-4, Employee’s Withholding Allowance Certificate, or Form
W-4P, Withholding Certificate for Pension or Annuity Payments.
Make estimated tax payments by filing Form 1040-ES, Estimated
Tax for Individuals. For more information, see Pub. 505, Tax Withholding and Estimated Tax.

If you are not required to give the employee a Form W-2, you
must provide the notification by February 7, 2008.
You must hand the notice directly to the employee or send it by
First-Class Mail to the employee’s last known address.
How do my employees claim the EIC? Eligible employees claim

the EIC on their 2007 tax returns.
How do my employees get advance EIC payments? Eligible employees who have a qualifying child can get part of the credit with
their pay during the year by giving you a completed Form W-5. You
must include advance EIC payments with wages paid to these
employees. For details, including tables that show you how to
figure the amount to add to the employee’s net pay, see Pub.15
(Circular E), Employer’s Tax Guide.

Estimated tax payments must be made as the tax liability is incurred: by April 15, June 15, September 15, and
the following January 15. If you file your form 1040 by
CAUTION
January 31 and pay the rest of the tax that you owe, you
do not need to make the payment due on January 15.

!

Exception. You will not be penalized for failure to make estimated

tax payments if both 1 and 2 below apply for the year.

Rules For Business Employers

1. You will not have federal income tax withheld from wages,
pensions, or any other payments you receive.
2. Your income taxes, excluding your household employment
taxes, would not be enough to require payment of estimated taxes.

What Records To Keep

Do not use Schedule H if you chose to report employment taxes for
your household employees along with your other employees on
Form 941, Employer’s QUARTERLY Federal Tax Return, Form
943, Employer’s Annual Federal Tax Return for Agricultural Employees, or Form 944, Employer’s ANNUAL Federal Tax Return.
If you report this way, be sure to include your household employees’ wages on your Form 940, Employer’s Annual Federal Unemployment (FUTA) Tax Return.

You must keep copies of Schedule H and related Forms W-2, W-3,
W-4, and W-5, Earned Income Credit Advance Payment Certificate, for at least 4 years after the due date for filing Schedule H or
the date the taxes were paid, whichever is later. If you have to file
Form W-2, also keep a record of each employee’s name and social
security number. Each payday, you should record the dates and
amounts of:
• Cash and noncash wage payments.
• Any employee social security tax withheld.
• Any employee Medicare tax withheld.
• Any federal income tax withheld.
• Any advance EIC payments you made.

Certain state disability plan payments to household employees are
treated as wages subject to social security and Medicare taxes. If
your employee received payments from a plan that withheld the
employee’s share of social security and Medicare taxes, include the
payments on lines 1 and 3 of Schedule H and complete the rest of
Part I through line 5. Add lines 2, 4, and 5. From that total, subtract
the amount of these taxes withheld by the state. Enter the result on
line 6. Also, enter “disability” and the amount subtracted on the
dotted line next to line 6. See the notice issued by the state for more
details.

State Disability Payments

H-6

Page 7 of 11 of 2007 Instructions for Schedule H (Form 1040) Household Employment
Taxes
14:13 - 30-JUL-2007
The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.

SE:W:CAR:MP:T:T:SP, 1111 Constitution Ave. NW, IR-6406,
Washington, DC 20224. Do not send Schedule H (Form 1040) to
this address. Instead, see When and Where to File on page H-3.

How to Get Forms and Publications
To get the IRS forms and publications mentioned in these instructions (including Notice 797), visit the IRS website at www.irs.gov
or call 1-800-TAX-FORM (1-800-829-3676).

Privacy Act and Paperwork
Reduction Act Notice

Completed Example of Schedule H,
Form W-2, and Form W-3

We ask for the information on this form to carry out the Internal
Revenue laws of the United States. You are required to give us the
information. We need it to ensure that you are complying with these
laws and to allow us to figure and collect the right amount of tax.

On February 14, 2007, Susan Green hired Helen Maple to clean her
house every Wednesday. Susan did not have a household employee
in 2006.
Susan paid Helen $50 every Wednesday for her day’s work.
Susan decided not to withhold Helen’s share of the social security
and Medicare taxes from the wages she paid Helen. Instead, she
will pay Helen’s share of these taxes from her own funds. Susan did
not withhold federal income tax because Helen did not give her a
Form W-4 to request withholding and no withholding is otherwise
required. Susan also did not pay Helen advance earned income
credit payments because Helen did not give her a Form W-5.

You are not required to provide the information requested on a
form that is subject to the Paperwork Reduction Act unless the form
displays a valid OMB control number. Books or records relating to
a form or instructions must be retained as long as their contents may
become material in the administration of any Internal Revenue law.
Subtitle C, Employment Taxes, of the Internal Revenue Code
imposes employment taxes on wages, including income tax withholding. This form is used to determine the amount of the taxes that
you owe. Section 6011 requires you to provide the requested information if the tax is applicable to you. Section 6109 requires you to
provide your employer identification number (EIN).

Helen was employed by Susan for the rest of the year (a total of
46 weeks). The following is some of the information Susan will
need to complete Schedule H, Form W-2, and Form W-3.

Generally, tax returns and return information are confidential, as
required by section 6103. However, section 6103 allows or requires
the IRS to disclose or give the information shown on your tax return
to others as described in the Code. For example, we may disclose
your tax information to the Department of Justice for civil and
criminal litigation, and to cities, states, and the District of Columbia
for use in administering their tax laws. We may also disclose this
information to other countries under a tax treaty, to federal and state
agencies to enforce federal nontax criminal laws, or to federal law
enforcement and intelligence agencies to combat terrorism.

Helen’s total cash wages . . . . .
Helen’s share of the:
Social security tax . . . . . .
Medicare tax . . . . . . . . . .

The time needed to complete and file this form will vary depending on individual circumstances. The estimated burden for individual taxpayers filing this form is approved under OMB control
number 1545-0074 and is included in the estimates shown in the
instructions for their individual income tax return. The estimated
burden for all other taxpayers who file this form is shown below.
Recordkeeping, 1hr., 38 min.; Learning about the law or the
form, 30 min.; Preparing the form, 54 min.; Copying, assembling, and sending the form to the IRS, 34 min.

$2,300.00
($50 x 46 weeks)
$142.60
($2,300 x 6.2% (.062))
$33.35
($2,300 x 1.45% (.0145))

Helen’s total cash wages each quarter:
1st quarter . . . . . . . . . . . $350.00
2nd quarter . . . . . . . . . . $650.00
3rd quarter . . . . . . . . . . . $650.00
4th quarter . . . . . . . . . . . $650.00

($50
($50
($50
($50

x
x
x
x

7 weeks)
13 weeks)
13 weeks)
13 weeks)

Amount included in box 1 of Form W-2 and Form W-3:
Cash wages . . . . . . . . . . . . . . . . . . . . . . . . . $2,300.00
Helen’s share of social security tax paid by
Susan . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
142.60
Helen’s share of Medicare tax paid by Susan
33.35
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,475.95

If you have comments concerning the accuracy of these time
estimates or suggestions for making this form simpler, we would be
happy to hear from you. You can write to: Internal Revenue Service, Tax Products Coordinating Committee,

H-7

Page 8 of 11 of 2007 Instructions for Schedule H (Form 1040) Household Employment
Taxes
14:13 - 30-JUL-2007
The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.

SCHEDULE H
(Form 1040)
Department of the Treasury
Internal Revenue Service (99)

OMB No. 1545-1971

Household Employment Taxes
(For Social Security, Medicare, Withheld Income, and Federal Unemployment (FUTA) Taxes)
䊳 Attach to Form 1040, 1040NR, 1040-SS, or 1041.
䊳 See separate instructions.

Name of employer

44

Social security number

0 0 0

Susan Green

A

2007

Attachment
Sequence No.

11

1 1 1 1

Employer identification number

0 0 1

2 3 4 5 6 7

Did you pay any one household employee cash wages of $1,500 or more in 2007? (If any household employee was your
spouse, your child under age 21, your parent, or anyone under age 18, see the line A instructions on page H-3 before you
answer this question.)
⻫ Yes. Skip lines B and C and go to line 1.
No. Go to line B.

Part I

Social Security, Medicare, and Income Taxes
1

2, 3 0 0

00

1

Total cash wages subject to social security taxes (see page H-4)

2

Social security taxes. Multiply line 1 by 12.4% (.124)

3

Total cash wages subject to Medicare taxes (see page H-4)

4

Medicare taxes. Multiply line 3 by 2.9% (.029)

4

5

Federal income tax withheld, if any

5

6

Total social security, Medicare, and income taxes (add lines 2, 4, and 5)

6

7

Advance earned income credit (EIC) payments, if any

7

8

Net taxes (subtract line 7 from line 6)

8

9

Did you pay total cash wages of $1,000 or more in any calendar quarter of 2006 or 2007 to all household employees?
(Do not count cash wages paid in 2006 or 2007 to your spouse, your child under age 21, or your parent.)

2
3

2, 3 0 0

285

20

00
66 70

351

90

351

90

⻫ No. Stop. Enter the amount from line 8 above on Form 1040, line 62. If you are not required to file Form 1040, see the
line 9 instructions on page H-4.

H-8

Page 9 of 11 of 2007 Instructions for Schedule H (Form 1040) Household Employment
Taxes
14:13 - 30-JUL-2007
The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.

Note: Although not shown, Susan also enters on Form W-2 the
required state or local income tax information in boxes 15 through 20.
a Control number

22222

Visit the SSA website at www.socialsecurity.gov/employer to file
Copy A of Form W-2 electronically.

For Official Use Only

Void

䊳

OMB No. 1545-0008

b Employer identification number (EIN)

1

Wages, tips, other compensation

2

Federal income tax withheld

4

Social security tax withheld

6

Medicare tax withheld

8

Allocated tips

2475.95

00-1234567
c Employer’s name, address, and ZIP code

Social security wages

3

2300.00

Susan Green
16 Gray Street
Anyplace, CA 92665

5

142.60

Medicare wages and tips

2300.00

d Employee’s social security number

33.35

7

Social security tips

9

Advance EIC payment

10

Dependent care benefits

000-00-4567
e Employee’s first name and initial

Last name

Helen R.

12a See instructions for box 12

Nonqualified plans

Suff. 11

C
o
d
e

Maple
13

19 Pine Avenue
Anycity, CA 92666

Statutory
employee

14

Retirement
plan

Third-party
sick pay

12b
C
o
d
e

12c

Other

C
o
d
e

12d
C
o
d
e

f Employee’s address and ZIP code
15 State

Form

16 State wages, tips, etc.

Employer’s state ID number

17 State income tax

2007

Wage and Tax
Statement

W-2

18 Local wages, tips, etc.

Control number

b

Kind
of
Payer

䊳

33333
941

Military

CT-1

Hshld.
emp.

c

Total number of Forms W-2

e

Employer identification number (EIN)

d

20 Locality name

Department of the Treasury—Internal Revenue Service
For Privacy Act and Paperwork Reduction
Act Notice, see back of Copy D.

Copy A For Social Security Administration — Send this entire page with
Form W-3 to the Social Security Administration; photocopies are not acceptable.

a

19 Local income tax

Cat. No. 10134D

䊳

For Official Use Only
OMB No. 1545-0008

943

944

Medicare
govt. emp.

Third-party
sick pay

Establishment number

1

Wages, tips, other compensation

2

Federal income tax withheld

4

Social security tax withheld

6

Medicare tax withheld

8

Allocated tips

2475.95
Social security wages

3

2300.00

142.60

5

Medicare wages and tips

7

Social security tips

9

Advance EIC payments

10

Dependent care benefits

11

Nonqualified plans

12

Deferred compensation

13

For third-party sick pay use only

14

Income tax withheld by payer of third-party sick pay

16

State wages, tips, etc.

17

State income tax

18

Local wages, tips, etc.

19

Local income tax

1

2300.00

33.35

00-1234567
f Employer’s name

Susan Green
16 Gray Street
Anyplace, CA 92665
g

Employer’s address and ZIP code

h

Other EIN used this year

15

State

Employer’s state ID number

Contact person

Telephone number

(
Email address

123

For Official Use Only

456-7890

)

Fax number

(

)

Under penalties of perjury, I declare that I have examined this return and accompanying documents, and, to the best of my knowledge and belief,
they are true, correct, and complete.

Signature

Form

䊳

Title

䊳

Date

W-3 Transmittal of Wage and Tax Statements

Note: When you fill in Forms W-2 and W-3, please—
● Type or print entries, if possible, using black ink.
● Enter all money amounts without the dollar sign and comma,
but with the decimal point (for example, 2475.95 not $2,475.95).

2007

䊳

1/29/08

Department of the Treasury
Internal Revenue Service

● Do not round money amounts—show the cents portion.

H-9

Page 10 of 11 of 2007 Instructions for Schedule H (Form 1040) Household Employment
Taxes
14:13 - 30-JUL-2007
The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.

State Unemployment Tax Agencies
See the Appendix in Pub. 926, Household Employer’s Tax Guide for complete contact information.
State

Alabama . . . . . . . .
Alaska . . . . . . . . . .
Arizona . . . . . . . . .
Arkansas . . . . . . . .
California . . . . . . . .
Colorado . . . . . . . .
Connecticut . . . . . .
Delaware . . . . . . . .
District of Columbia
Florida . . . . . . . . . .
Georgia . . . . . . . . .
Hawaii . . . . . . . . . .
Idaho . . . . . . . . . . .
Illinois . . . . . . . . . .
Indiana . . . . . . . . .
Iowa . . . . . . . . . . .
Kansas . . . . . . . . . .
Kentucky . . . . . . . .
Louisiana . . . . . . . .
Maine . . . . . . . . . .
Maryland . . . . . . . .
Massachusetts . . . . .
Michigan . . . . . . . .
Minnesota . . . . . . .
Mississippi . . . . . . .
Missouri . . . . . . . .
Montana . . . . . . . .
Nebraska . . . . . . . .
Nevada . . . . . . . . .
New Hampshire . . .
New Jersey . . . . . .
New Mexico . . . . .
New York . . . . . . .
North Carolina . . . .
North Dakota . . . . .
Ohio . . . . . . . . . . .
Oklahoma . . . . . . .
Oregon . . . . . . . . .
Pennsylvania . . . . .
Puerto Rico . . . . . .
Rhode Island . . . . .
South Carolina . . . .
South Dakota . . . . .
Tennessee . . . . . . .
Texas . . . . . . . . . .
Utah . . . . . . . . . . .
Vermont . . . . . . . .
Virginia . . . . . . . . .
Virgin Islands . . . . .
Washington . . . . . .
West Virginia . . . . .
Wisconsin . . . . . . .
Wyoming . . . . . . . .

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Web Address

(334) 242-8830 . . . . . . .
(800) 448-3527 . . . . . . .
(602)771 – 6601 . . . . . . .
(501) 682-3798 . . . . . . .
(888) 745-3886 . . . . . . .
(800) 480-8299 . . . . . . .
(860) 263-6550 . . . . . . .
(302) 761-8484 . . . . . . .
(202) 698-7550 . . . . . . .
(800) 482-8293 . . . . . . .
(404) 232-3301 . . . . . . .
(808) 586-8913 . . . . . . .
(800) 448-2977 . . . . . .
(800) 247-4984 . . . . . . .
(317) 232-7436 . . . . . . .
(515) 281-5339 . . . . . . .
(785) 296-5025 . . . . . . .
(502) 564-2272 . . . . . . .
(225) 342-2944 . . . . . . .
(207) 287-3176 . . . . . . .
(800) 492-5524 . . . . . . .
(617) 626-5050 . . . . . . .
(313) 456-2180 . . . . . . .
(651) 296-6141 . . . . . . .
(601) 961-7755 . . . . . . .
(573) 751-3340 . . . . . . .
(406) 444-3834 . . . . . . .
(402) 471-9935 . . . . . . .
(775) 687-4545 . . . . . . .
(603) 228-4033 . . . . . . .
(609) 633-6400 . . . . . . .
(505) 841-8582 . . . . . . .
(518)457-4179 . . . . . . . .
(919) 733-7396 . . . . . . .
(800) 472-2952 . . . . . . .
(614) 466-2319 . . . . . . .
(405) 557-7170 . . . . . . .
(503) 947-1488, option 5
(717) 787-7679 . . . . . . .
(787) 754-5262
(401) 222-3696 . . . . . . .
(803) 737-3075 . . . . . . .
(605) 626-2312 . . . . . . .
(615) 741-2486 . . . . . . .
(512) 463-2731 . . . . . . .
(801) 526-9400 . . . . . . .
(802) 828-4252 . . . . . . .
(804) 371 – 7159 . . . . . .
(340) 776 – 3700 . . . . . .
(360) 902-9360 . . . . . . .
(304) 558-2676 . . . . . . .
(608) 261-6700 . . . . . . .
(307) 235-3217 . . . . . . .

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www.dir.alabama.gov/
www.labor.state.ak.us
www.de.state.az.us
www.state.ar.us/esd
www.edd.cahwnet.gov
www.coworkforce.com
www.ctdol.state.ct.us
www.delawareworks.com
www.dcnetworks.org
http://dor.myflorida.com/dor/uc/
www.dol.state.ga.us
www.hawaii.gov/labor/
www.labor.state.id.us
www.ides.state.il.us
www.in.gov/dwd
www.iowaworkforce.org
www.dol.ks.gov
www.oet.ky.gov
www.ldol.state.la.us
www.state.me.us/labor
www.dllr.state.md.us
www.detma.org
www.michigan.gov/uia
www.uimn.org
www.mdes.ms.gov
www.dolir.mo.gov
www.uid.dli.mt.gov
www.dol.state.ne.us
www.detr.state.nv.us
www.nhes.state.nh.us
www.state.nj.us/labor/
www.dws.state.nm.us/
www.labor.state.ny.us
www.ncesc.com
www.jobsnd.com
www.jfs.ohio.gov/ouc
www.oesc.state.ok.us
www.employment.oregon.gov
www.dli.state.pa.us

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www.uitax.ri.gov
www.sces.org/ui
www.state.sd.us
www.tn.gov/labor-wfd/
www.twc.state.tx.us
www.jobs.utah.gov/ui
www.labor.vermont.gov
www.VaEmploy.com
www.vidol.gov
www.wa.gov/esd
www.wvbep.org/bep/uc/
www.dwd.state.wi.us
http://wydoe.state.wy.us

H-10

Page 11 of 11 of 2007 Instructions for Schedule H (Form 1040) Household Employment
Taxes
14:13 - 30-JUL-2007
The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.

Do You Have To File Form 1040, 1040NR, 1040-SS, or 1041?
Yes — Attach Schedule H to that form and mail to the address in your tax return booklet.
No — Mail your completed Schedule H and payment to the Internal Revenue Service Center for the place where
you live. No street address is needed. See When and Where To File on page H-3 for the information to
enter on your payment.

Kentucky /

IF you live in...

THEN use this address...

IF you live in...

THEN use this address...

Alabama, Delaware, Florida,
Georgia, North Carolina,
Rhode Island,
South Carolina, Virginia

Atlanta, GA 39901-0002

Fresno, CA 93888-0002

District of Columbia, Maine,
Maryland, Massachusetts,
New Hampshire, New York,
Vermont

Andover, MA 05501-0002

Kentucky, Pennsylvania

Philadelphia, PA 19255-0002

Alaska, Arizona, California,
Colorado, Hawaii, Idaho,
Minnesota, Montana,
Nebraska, Nevada,
New Mexico, North Dakota,
Oregon, South Dakota, Utah,
Washington, Wyoming
Arkansas, Connecticut,
Illinois, Indiana, Iowa,
Michigan, Missouri,
New Jersey, Ohio, Wisconsin

Kansas, Louisiana,
Mississippi, Oklahoma,
Tennessee, Texas, West
Virginia, APO, FPO

Austin, TX 73301-0002

American Samoa,
nonpermanent residents of
Guam or the Virgin Islands**,
Puerto Rico, dual-status
aliens, a foreign country

Austin, TX 73301-0215 USA

Iowa, Kansas, /
Oklahoma
Wisconsin
Kansas City, MO 64999-0002

Pennsylvania, West
Virginia/

*If you live in Kentucky or Pennsylvania and file your return after June 30, 2007, use: Internal Revenue Service Center,
Kansas City, MO 64999-0002.
** Permanent residents of Guam should use: Department of Revenue and Taxation, Government of Guam, P.O. Box 23607,
GMF, GU 96921; permanent residents of the Virgin Islands should use: V.I. Bureau of Internal Revenue, 9601 Estate Thomas,
Charlotte Amalie, St. Thomas, VI 00802.

H-11
Printed on recycled paper