Answers to the Most Frequently Asked Questions About Your Annual Payroll Tax Filings

Complete and Essential Payroll Clients: Your Employee W-2 forms are available for distribution in your eFiling Cabinet. Alternately, your employee may access their W2s directly by logging in with their email at https://members.homeworksolutions.com. Please print and distribute a W2 to your employee no later than January 31, or encourage them to log in and download the document.  We will also mail a copy to your employee at the address of record in our system.

We will electronically file or e-File your W2/W3 documents with the Social Security Administration no later than January 31. Changes after filing will incur a $225 amendment fee.

Reminders

• INCLUDE Schedule H with YOUR Federal 1040.
• DO take credit for 1040ES payments.
• DO verify names and SSNs on W-3/W-2 forms.
• If you use a paid preparer for your personal income taxes, provide them the Form 1040 Schedule H and the Household Employer Year End Summary so they may make the proper entries on your annual income tax return.
• If you want to authorize your accountant or tax preparer to speak with us directly about your accounts or to receive copies of your tax documents, please add them to your account by clicking on the “Add Household User” button in your accounts and selecting the “CPA” role for your newly authorized user.

The wages paid and reconciliation of federal payroll taxes due are reported on IRS Form 1040 Schedule H. You should attach Schedule H to your Form 1040 and enter the total of payroll taxes on Form 1040 Schedule 2: Additional Tax (Part II) line 9. If you made quarterly tax payments via HWS or on your own using Form 1040ES, enter the sum of those payments remitted before January 15, 2023 on Form 1040 Line 26.

Unless you asked us not to do so, HomeWork Solutions makes your federal tax payments quarterly via the IRS EFTPS system. You or your authorized tax preparer are encouraged to verify actual payments made online with the IRS.

Schedule H calculates federal employment taxes due for household workers and is filed with your personal income tax Form 1040. The amounts shown on Line 26 of Schedule H must be entered on Form 1040 Schedule 2: Additional Tax (Part II) line 9.

Taxes paid by the employer on behalf of an employee (generally Social Security and Medicare) are included in the wage amounts in Box 1 but not in the amounts in Boxes 3 and 5. This typically occurs when an employer pays a net amount to the worker and agrees to pay the worker’s portion of Social Security and Medicare taxes.

This can also happen if an employee does not meet the annual threshold for FICA tax.  In this case, the employee wages are reported as taxable for income tax (box 1), but not for Social Security or Medicare.

Unemployment contributions are paid on a wage base determined by state legislature. If you paid your employee wages in excess of this base, those excess wages are exempt from tax. However, you must submit the tax returns, even if no tax is due.

Social Security and Medicare taxes remitted with Schedule H include the employee and employer components combined (15.3%). The Form W-2 reflects employee paid taxes only (7.65%) and does not include your employer contributions.

States are assessed FUTA Credit Reductions, meaning employers must pay FUTA tax surcharges, when Federal loans to the states to support unemployment benefits distribution have not been properly repaid.

If you live in a Credit Reduction state (For 2023: California, New York) you may be prohibited from e-filing your Federal return. The IRS e-filing systems may not support the necessary Credit Reduction Worksheet calculations on the Form 1040 Schedule H. If this occurs, speak to your tax preparer about alternatives for filing your tax return.

Advise your employee that he/she is responsible for paying any income taxes due on wages he/she received. You may withhold (deduct) income taxes going forward to avoid these year end surprises. If you write your own paychecks, our online tax calculator facilitates these calculations UNLESS you are in a nanny share (call us about those calculations, as adjustments are required).

Your employee instructs you on the amount of income tax to be withheld by completing Form W-4  Employee’s Withholding Certificate.  Your employees can update their withholding elections by clicking on the “My Profile” link in their account at https://members.homeworksolutions.com.

It is most likely that you forgot to take credit for the quarterly 1040ES payments you made throughout the year. The Schedule H adds tax due to your income tax return; the 1040ES payments credit taxes paid to your return. Typically they will offset each other.

Your Year End Summary has an itemization of the 1040ES payments that HWS made on your behalf. You can confirm these payments at EFTPS online at www.eftps.gov.

Turbo Tax’s online interview asks you if you made Estimated Tax Payments – you need to answer YES and follow the online data entry prompts. If you already reached the Schedule H section of TurboTax, you missed it. Go back to your W-2 entry area and go through those questions again!

Unfortunately, our staff is unable to provide technical support for TurboTax or any other personal income tax software.

The IRS is instituting very strict controls on its e-File system to protect against fraud and abuse. Typical reasons we have found that an employee has difficulty with e-File include:

1. Your Employer Identification Number (EIN or FEIN) was issued  within the prior tax year. This is an anti-fraud measure .
2. The employee’s Social Security Number was issued within the last year and this is her first Federal Income Tax filing. Again, another anti-fraud measure.
3. The employee’s name was changed with the Social Security Administration within the last year due to marriage or divorce.

In all of the above cases, the employee simply needs to file a paper return this year.

If the employee’s name has changed and she HAS NOT recorded this with the Social Security Administration (SSA) she could experience difficulties when applying for a tax refund due to a “mismatch” between the name on the W-2 and tax return and the name in SSA records associated with that Social Security Number. The employee generally will need to go to a local SSA office to get this straightened out.

Generally, anyone who receives US-source income is required by law to file a US federal tax return. There are particular instances when this is not required and these can be found at the IRS website. Most states have filing requirements that mirror the Federal income tax system. Filing instructions for the Federal form 1040 or 1040NR should be consulted for specifics.

There are two popular household employer tax breaks for families to make care more affordable. A family may use up to $16,000 paid to a nanny or senior caregiver (qualified expenses) in the 2023 tax year. Some of these tax breaks are income-restricted. They also require that both spouses must pass the “work-related expense test.” You (and your spouse if filing jointly) need to be employed or be a full-time student and the care must be for a qualified dependent. Additionally, the family must report and pay taxes on the nanny’s or caregiver’s wages to be eligible for either tax break. Consult your tax advisor for details.