IRS Releases Publication 926 (2017), Household Employer's Tax Guide

Future Developments

For the latest information about developments related to Pub. 926, such as legislation enacted after it was published, go to IRS.gov/pub926.

What's New

Social security and Medicare tax for 2017. The social security tax rate is 6.2% each for the employee and employer, unchanged from 2016. The social security wage base limit is $127,200.

The Medicare tax rate is 1.45% each for the employee and employer, unchanged from 2016. There is no wage base limit for Medicare tax. Social security and Medicare taxes apply to the wages of household employees you pay $2,000 or more in cash in 2017. For more information, see Cash wages, later.

Qualified parking exclusion and commuter transportation benefit. For 2017, the monthly exclusion for qualified parking is $255 and the monthly exclusion for commuter highway vehicle transportation and transit passes is $255.

New certification program for professional employer organizations. The Tax Increase Prevention Act of 2014 required the IRS to establish a voluntary certification program for professional employer organizations (PEOs). PEOs handle various payroll administration and tax reporting responsibilities for their business clients and are typically paid a fee based on payroll costs. To become and remain certified under the certification program, certified professional employer organizations (CPEOs) must meet tax status, background, experience, business location, financial reporting, bonding, and other requirements described in sections 3511 and 7705 and related published guidance. The IRS began accepting applications for PEO certification in July 2016. Certification as a CPEO affects the employment tax liabilities of both the CPEO and its customers. A CPEO is generally treated as the employer of any individual performing services for a customer of the CPEO and covered by a contract described in section 7705(e)(2) between the CPEO and the customer (CPEO contract), but only for wages and other compensation paid to the individual by the CPEO. For more information, visit IRS.gov and enter "CPEO" in the search box.

Reminders

Filing due date for 2017 Forms W-2 and W-3. Both paper and electronically filed 2017 Forms W-2 and W-3 must be filed with the SSA by January 31, 2018.

Credit reduction states. A state that hasn't repaid money it borrowed from the federal government to pay unemployment benefits is a "credit reduction state." The Department of Labor (DOL) determines these states. If you paid any wages that are subject to the unemployment compensation laws in any credit reduction state, your federal unemployment (FUTA) tax credit is reduced. See the Instructions for Schedule H (Form 1040) for more information.

Medicaid waiver payments. Notice 2014-7 provides that certain Medicaid waiver payments are excludable from income for federal income tax purposes. See Notice 2014-7, 2014-4, I.R.B. 445, available at IRS.gov/irb/2014-4_IRB/ar06.html. For more information, including questions and answers related to Notice 2014-7, visit IRS.gov and enter "Medicaid waiver payments" in the search box.

Outsourcing payroll duties. Unless the wages and other compensation paid to the individual performing services for you are paid by a CPEO and are covered by a contract described in section 7705(e)(2) between you and a CPEO (CPEO contract), you're responsible to ensure that tax returns are filed and deposits and payments are made, even if you contract with a third party to perform these acts. You remain responsible if the third party fails to perform any required action. If you choose to outsource any of your payroll and related tax duties (that is, withholding, reporting, and paying over social security, Medicare, FUTA, and income taxes) to a third-party payer, such as a payroll service provider or reporting agent, visit IRS.gov and enter "outsourcing payroll duties" in the search box for helpful information on this topic.

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Introduction

The information in this publication applies to you only if you have a household employee. If you have a household employee in 2017, you may need to pay state and federal employment taxes for 2017. You generally must add your federal employment taxes to the income tax that you will report on your 2017 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, FUTA, 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 send us comments from IRS.gov/formcomment.

Or you can write to:

Internal Revenue Service Tax Forms and Publications 1111 Constitution Ave. NW, IR-6526 Washington, DC 20224

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.

Although we can't respond individually to each comment received, we do appreciate your feedback and will consider your comments as we revise our tax forms, instructions, and publications. We can't answer tax questions sent to the above address.

Ordering forms and publications. Visit IRS.gov/forms to download forms and publications. Otherwise, you can go to IRS.gov/orderforms to order current and prior-year forms and instructions. Your order should arrive within 10 business days.

Tax questions. If you have an employment tax question, check the information available on IRS.gov or call 1-800-829-4933 (TDD/TTY for persons who are deaf, hard of hearing, or have a speech disability at 1-800-829-4059) Monday-Friday from 7:00 a.m. to 7:00 p.m. local time (Alaska and Hawaii follow Pacific time).

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 doesn't 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 doesn't 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. Some examples of workers who do household work are:

A worker who performs child care services for you in his or her home generally isn't your employee.

If an agency provides the worker and controls what work is done and how it is done, the worker isn't 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 Pub. 15-A.

Can Your Employee Legally Work in the United States?

CAUTION: It is unlawful for you knowingly to hire or continue to employ an alien who can't 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 U.S. Citizenship and Immigration Services (USCIS) 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. Don't submit it to the IRS, the USCIS, or any other government or other entity. The form must be kept available for review upon notice by an authorized U.S. Government official.

For more information on completing Form I-9, see M-274, Handbook for Employers, published by USCIS.

You can get Form I-9 and the USCIS Handbook for Employers by visiting the USCIS website at uscis.gov/i-9-central.

You can also call the USCIS at 1-800-870-3676 to order the Handbook for Employers. If you have questions about the employment eligibility verification process or other immigration-related employment matters, contact the USCIS Office of Business Liaison at 1-800-357-2099.

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 don't 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.

Table 1. Do You Need To Pay Employment Taxes?

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 You may need to do the following things when you have a household

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 a list of state unemployment tax agencies, visit the U.S. Department of Labor's website at workforcesecurity.doleta.gov/unemploy/agencies.asp. You should also determine if you need to pay or collect other state employment taxes or carry workers' compensation insurance.

Consequences of not paying employment taxes. If you have a household employee and you're required to withhold and pay employment taxes and you don't, you will generally be liable for the employment taxes that you should've withheld and paid. See section 2 in Pub. 15 for additional information. Interest and penalties may also be charged. You may have to pay a penalty if you don't give Forms W-2 to your employees or file Copy A of the forms with the SSA by the due dates. You may also have to pay a penalty if you don't show your employee's SSN on Form W-2 or don't provide correct information on the form.

Social Security and Medicare Taxes

The 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 also 7.65% (6.2% for social security tax and 1.45% for Medicare tax). In addition to withholding Medicare tax at 1.45%, you must withhold a 0.9% Additional Medicare Tax from wages you pay to an employee in excess of $200,000 in a calendar year. You're required to begin withholding Additional Medicare Tax in the pay period in which you pay wages in excess of $200,000 to an employee and continue to withhold it each pay period until the end of the calendar year. Additional Medicare Tax is only imposed on the employee. There is no employer share of Additional Medicare Tax. All wages that are subject to Medicare tax are subject to Additional Medicare Tax withholding if paid in excess of the $200,000 withholding threshold. For more information on Additional Medicare Tax, visit IRS.gov and enter "Additional Medicare Tax" in the search box.

TIP: Generally, you can use Table 3 to figure the amount of social security and Medicare taxes to withhold from each wage payment.

You're 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 $2,000 or more in 2017, all cash wages you pay to that employee in 2017 (regardless of when the wages were earned) up to $127,200 are social security wages and all cash wages are Medicare wages. However, any noncash wages you pay don't count as social security and Medicare wages.

If you pay the employee less than $2,000 in cash wages in 2017, none of the wages you pay the employee are social security or 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 don't include the value of food, lodging, clothing, transit passes, 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.

Noncash items may be subject to federal income tax withholding. See Do You Need To Withhold Federal Income Tax, later. Also see section 5 of Pub. 15 for more information on cash and noncash wages, and Pub. 15-B for more information on fringe benefits.

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) and the notice issued by the state.

Wages not counted. Don't count wages you pay to any of the following individuals as social security or Medicare wages, even if these wages are $2,000 or more during the year.

If you reimburse your employee for qualified parking, transportation in a commuter highway vehicle, transit passes, or commuting by bicycle, you may be able to exclude the cash reimbursement amounts from counting as cash wages subject to social security and Medicare taxes. Qualified parking is parking at or near your home or at or near a location from which your employee commutes to your home. For 2017, you can reimburse your employee up to $255 per month for qualified parking; $255 per month for combined commuter highway vehicle transportation and transit passes; or $20 multiplied by the number of qualified bicycle commuting months during the calendar year. See Transportation (Commuting) Benefits in Pub. 15-B for more information. Any cash reimbursement over these amounts is included as wages.

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 $2,000 or more in 2017. However, if you prefer to pay the employee's share yourself, see Not withholding the employee's share, later.

You can withhold the employee's share of the taxes even if you're not sure your employee's cash wages will be $2,000 or more in 2017. If you withhold the taxes but then actually pay the employee less than $2,000 in cash wages for the year, you should repay the employee. Don't report withheld taxes that you repaid to the employee on Form W-2.

Withhold 7.65% (6.2% for social security tax and 1.45% for Medicare tax) from each payment of social security and Medicare wages. Generally, you can use Table 3 to figure the proper amount to withhold. You will pay the amount withheld to the IRS with your share of the taxes. Don't withhold any social security tax after your employee's social security wages for the year reach $127,200.

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.

CAUTION: In addition to withholding Medicare tax at 1.45%, you must withhold a 0.9% Additional Medicare Tax from wages you pay to an employee in excess of $200,000 in a calendar year. You're required to begin withholding Additional Medicare Tax in the pay period in which you pay wages in excess of $200,000 to an employee and continue to withhold it each pay period until the end of the calendar year. Additional Medicare Tax is only imposed on the employee. There is no employer share of Additional Medicare Tax. All wages that are subject to Medicare tax are subject to Additional Medicare Tax withholding if paid in excess of the $200,000 withholding threshold. For more information on Additional Medicare Tax, visit IRS.gov and enter "Additional Medicare Tax" in the search box.

Example. On February 13, 2017, Mary Brown hired Jane A. Oak (who is an unrelated individual over age 18) to care for her child and agreed to pay cash wages of $50 every Friday. Jane worked for the remainder of the year (a total of 46 weeks). Jane didn't give Mary a Form W-4 to request income tax withholding. The following is the information Mary will need to complete Schedule H, Form W-2, and Form W-3. See the completed examples of Form W-2 and Form W-3 for 2017 at the end of this publication.

 Total cash wages paid to Jane     $2,300.00

Not withholding the employee's share. If you prefer to pay your employee's social security and Medicare taxes from your own funds, don't 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 aren't counted as social security and Medicare wages or as federal unemployment (FUTA) wages. Report the social security and Medicare taxes that you paid in boxes 4 and 6 of your employee's Form W-2; also add the taxes to your employee's wages reported in box 1 of Form W-2.

Example. In 2017, 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 $2,000 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 $7.65 ($6.20 for social security tax + $1.45 for Medicare tax) 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).

For a more detailed example that includes a completed Schedule H, Schedule H (Form 1040).

Table 3. Employee Social Security (6.2%) and Medicare (1.45%¹) Tax Withholding Table

 (See Pub. 15 for income tax withholding tables.)

The FUTA tax is 6.0% of your employee's FUTA wages. However, you may be able to take a credit of up to 5.4% against the FUTA tax, resulting in a net tax rate of 0.6%. Your credit for 2017 is limited unless you pay all the required contributions for 2017 to your state unemployment fund by April 17, 2018. The credit you can take for any contributions for 2017 that you pay after April 17, 2018, is limited to 90% of the credit that would have been allowable if the contributions were paid by April 17, 2018. (If you didn't pay all the required contributions for 2016 by April 18, 2017, see Credit for 2016, later.)

Note. If a due date falls on a Saturday, Sunday, or legal holiday, payments are considered timely if made by the next business day. The term "legal holiday" means any legal holiday in the District of Columbia. Pay the tax as discussed under How Do You Make Tax Payments, later. Also, see What Forms Must You File, later.

Note. The 5.4% credit is reduced for wages paid in a credit reduction state. See the Instructions for Schedule H (Form 1040).

CAUTION: Don't withhold the FUTA tax from your employee's wages. You must pay it from your own funds.

FUTA wages. Figure the FUTA tax on the FUTA wages you pay. If you pay cash wages to all of your household employees totaling $1,000 or more in any calendar quarter of 2016 or 2017, the first $7,000 of cash wages you pay to each household employee in 2017 is FUTA wages. (A calendar quarter is January through March, April through June, July through September, or October through December.) If your employee's cash wages reach $7,000 during the year, don't figure the FUTA tax on any wages you pay that employee during the rest of the year. For an explanation of cash wages, see the discussion on Social security and Medicare wages under Social Security and Medicare Taxes, earlier.

Wages not counted. Don't count wages you pay to any of the following individuals as FUTA wages.

Use Worksheet A to figure the credit for late contributions if you paid any state contributions after the due date for filing Form 1040.

Worksheet A. Worksheet for Credit for Late Contributions

 Keep for Your Records

You're not required to withhold federal income tax from wages you pay a household employee. You should withhold federal income tax only if your household employee asks you to withhold it and you agree. The employee must give you a completed Form W-4.

If you and your employee have agreed to withholding, either of you may end the agreement by letting the other know in writing.

If you agree to withhold federal income tax, you're responsible for paying it to the IRS. Pay the tax as discussed under How Do You Make Tax Payments, later. Also, see What Forms Must You File, later.

Use the income tax withholding tables in Pub. 15 to find out how much to withhold. Figure federal income tax withholding on wages before you deduct any amounts for other withheld taxes. Withhold federal income tax from each payment of wages based on the filing status and exemptions shown on your employee's Form W-4. Pub. 15 contains detailed instructions.

Wages. Figure federal income tax withholding on both cash and noncash wages you pay. Measure wages you pay in any form other than cash by the fair market value of the noncash item.

Don't count as wages any of the following items.

Paying tax without withholding. Any income tax you pay for your employee without withholding it from the employee's wages must be included in the employee's wages for federal income tax purposes. It also must be included in social security and Medicare wages and in federal unemployment (FUTA) wages.

What Do You Need To Know About the Earned Income Credit?

Certain workers can take the earned income credit (EIC) on their federal income tax return. This credit reduces their tax or allows them to receive a payment from the IRS.

Notice about the EIC. You must give your household employee a notice about the EIC if you agree to withhold federal income tax from the employee's wages (as discussed earlier under Do You Need To Withhold Federal Income Tax?) and the income tax withholding tables show that no tax should be withheld. Even if not required, you're encouraged to give the employee a notice about the EIC if his or her 2017 wages are less than $48,340 ($53,930 if married filing jointly).

Copy B of the 2017 Form W-2 has a statement about the EIC on the back. If you give your employee that copy by January 31, 2018 (as discussed under Form W-2 under What Forms Must You File, later), you don't have to give the employee any other notice about the EIC.

If you don't give your employee Copy B of the Form W-2, your notice about the EIC can be any of the following items.

How Do You Make Tax Payments?

When you file your 2017 federal income tax return in 2018, attach Form 1040, 1040NR, 1040-SS, or 1041. Use Schedule H to figure your total household employment taxes (social security, Medicare, FUTA, and withheld federal income taxes). Add these household employment taxes to your income tax. Pay the amount due by April 17, 2018. For more information about using Schedule H, see Schedule H under What Forms Must You File, later.

You can avoid owing tax with your return if you pay enough tax during the year to cover your household employment taxes, as well as your income tax. You can pay the additional tax in any of the following ways.

If you receive a pension or annuity and want more federal income tax withheld to cover household employment taxes, give the payer a new Form W-4P (or a similar form provided by the payer). Complete it as before, but show the additional amount you want withheld from each benefit payment on line 3.

See Pub. 505 to make sure you will have the right amount withheld. It will help you compare your total expected withholding for 2017 with the combined income tax and employment taxes that you can expect to figure on your 2017 tax return.

Paying estimated tax. If you want to make estimated tax payments to cover household employment taxes, get Form 1040-ES. You can use its payment vouchers to make your payments by check or money order. You may be able to pay by Electronic Funds Withdrawal (EFW) or credit card. For details, see the form instructions and visit IRS.gov.

You can pay all the employment taxes at once or you can pay them in installments. If you have already made some estimated tax payments for 2017, you should increase your remaining payments to cover the employment taxes. Estimated tax payments for 2017 are due April 18, June 15, and September 15, 2017, and January 16, 2018.

Payment option for business employers. If you own a business or a farm operated for profit, you can choose either of two ways to pay your 2017 household employment taxes. You can pay them with your federal income tax as previously described, or you can include them with your federal employment tax deposits or other payments for your business or farm employees. For information on depositing employment taxes, see Pub. 15.

If you pay your household employment taxes with your business or farm employment taxes, you must report your household employment taxes with those other employment taxes on Form 941, Employer's QUARTERLY Federal Tax Return; Form 944, Employer's ANNUAL Federal Tax Return; or Form 943, Employer's Annual Federal Tax Return for Agricultural Employees, and on Form 940, Employer's Annual Federal Unemployment (FUTA) Tax Return. See Business employment tax returns, later.

CAUTION: The deduction that can be taken on Schedules F (Form 1040) for wages and employment taxes applies only to wages and taxes paid for business and farm employees. You can't deduct the wages and employment taxes paid for your household employees on your Schedule C or F.

More information. For more information about paying taxes through federal income tax withholding and estimated tax payments, and figuring the estimated tax penalty, see Pub. 505.

What Forms Must You File?

You must file certain forms to report your household employee's wages and the federal employment taxes for the employee if you pay any of the following wages to the employee.

Employer identification number (EIN). You must include your EIN on the forms you file for your household employee. An EIN is a nine-digit number issued by the IRS. It isn't the same as a social security number (SSN).

TIP: You ordinarily will have an EIN if you previously paid taxes for employees, either as a household employer or as a sole proprietor of a business you own. If you already have an EIN, use that number.

If you don't have an EIN, you may apply for one online. Go to IRS.gov and enter "EIN" in the search box. You may also apply for an EIN by faxing or mailing Form SS-4 to the IRS.

Form W-2. File a separate 2017 Form W-2 for each household employee to whom you pay either of the following wages during the year.

If you're not required to file a Form W-2, we encourage you to provide your household employee with a receipt for services that includes the dates worked, wages paid, and a general description of work completed. This receipt will help the household employee to report his or her wages on Form 1040.

Employee who leaves during the year. If an employee stops working for you before the end of 2017, you can file Form W-2 and provide copies to your employee immediately after you make your final payment of wages. You don't need to wait until 2018. If the employee asks you for Form W-2, give it to him or her within 30 days after the request or the last wage payment, whichever is later.

Schedule H. Use Schedule H to report household employment taxes if you pay any of the following wages to the employee.

Filing options when no return is required. If you're not required to file a 2017 tax return, you have the following two options.

Business employment tax returns. Don't use Schedule H if you choose to pay the employment taxes for your household employee with business or farm employment taxes. (See Payment option for business employers, earlier.) Instead, include the social security, Medicare, and withheld federal income taxes for the employee on the Form 941 or Form 944 you file for your business or on the Form 943 you file for your farm. Include the FUTA tax for the employee on your Form 940.

If you report the employment taxes for your household employee on Form 941, Form 944, or Form 943, file Form W-2 for that employee with the Forms W-2 and Form W-3 for your business or farm employees.

For information on filing Form 941 or Form 944, see Pub. 15. For information on filing Form 943, see Pub. 51. Both of these publications also provide information about filing Form 940.

What Records Must You Keep?

RECORDS: Keep your copies of Schedule H or other employment tax forms you file and related Forms W-2, W-3, and W-4. You must also keep records to support the information you enter on the forms you file. If you must file Form W-2, you will need to keep a record of your employee's name, address, and SSN.

Wage and tax records. On each payday, you should record the date and amounts of all the following items.

An employee who doesn't have an SSN must apply for one on Form SS-5, Application for a Social Security Card. An employee who has lost his or her social security card or whose name isn't correctly shown on the card may apply for a replacement card.

You can download Form SS-5 from the SSA website at socialsecurity.gov/online/ss-5.pdf.

Employees also can get Form SS-5 from any SSA office or by calling 1-800-772-1213.

How long to keep records. Keep your employment tax records for at least 4 years after the due date of the return on which you report the taxes or the date the taxes were paid, whichever is later.

Can You Claim a Credit for Child and Dependent Care Expenses?

If your household employee cares for your dependent who is under age 13 or for your spouse or dependent who isn't capable of self-care, you may be able to take an income tax credit against some of your expenses. To qualify, you must pay these expenses so you can work or look for work. If you can take the credit, you can include in your qualifying expenses your share of the federal and state employment taxes you pay, as well as the employee's wages. For information about the credit, see Pub. 503.

How Can You Correct Schedule H?

If you discover that you made an error on a Schedule H (or Anexo H-PR), the forms used to correct the error depend on whether the Schedule H was attached to another form or whether it was filed by itself.

Schedule H attached to another form. If you discover an error on a Schedule H that you previously filed with Form 1040X, Amended U.S. Individual Income Tax Return, and attach a corrected Schedule H. If you filed Formulario 1040-PR, file a Form 1040X and attach a corrected Anexo H-PR. If you discover an error on a Schedule H that you previously filed with Form 1041, U.S. Income Tax Return for Estates and Trusts, file an "amended" Form 1041 and attach a corrected Schedule H. You discovered (that is, ascertained) the error when you had enough information to be able to correct the error. Write "CORRECTED" (or "CORREGIDO") and the date you discovered the error in the top margin of your corrected Schedule H (or Anexo H-PR), in bold letters. In addition, explain the reason for your correction and the date the error was discovered in Part III of Form 1040X or in a statement attached to the amended Form 1041.

Schedule H filed by itself. If you discover an error on a Schedule H (or Anexo H-PR) that you filed as a stand-alone return, file another stand-alone Schedule H with the corrected information. You discovered (that is, ascertained) the error when you had enough information to be able to correct the error. Write "CORRECTED" (or "CORREGIDO") and the date you discovered the error in the top margin of your corrected Schedule H (or Anexo H-PR), in bold letters. In addition, explain the reason for your correction and the date the error was discovered in a statement attached to the corrected Schedule H. If you have an overpayment, also write "ADJUSTED" (or "CORREGIDO") or "REFUND" (or "REEMBOLSO") in the top margin, depending on whether you want to adjust your overpayment or claim a refund. (See Overpayment of tax, later.)

When to file. File a corrected Schedule H when you discover an error on a previously filed Schedule H. If you're correcting an underpayment, file a corrected Schedule H no later than the due date of your next tax return (generally, April 15 of the following calendar year) after you discover the error. If you're correcting an overpayment, file a corrected Schedule H within the refund period of limitations (generally 3 years from the date your original form was filed or within 2 years from the date you paid the tax, whichever is later).

Underpayment of tax. You must pay any underpayment of social security and Medicare taxes by the time you file the corrected Schedule H. Generally, by filing on time and paying by the time you file the return, you won't be charged interest (and won't be subject to failure-to-pay or estimated tax penalties) on the balance due. However, underreported FUTA taxes will be subject to interest.

Overpayment of tax. You may either adjust or claim a refund of an overpayment of social security and Medicare taxes on a previously filed Schedule H. However, if you're correcting an overpayment and are filing the corrected Schedule H within 90 days of the expiration of the period of limitations, you can only claim a refund of the overpayment.

Adjust the overpayment. If the corrected Schedule H is filed with a Form 1040X or an amended Form 1041, adjust your return by indicating on line 23 of the Form 1040X or on line 29a of the Form 1041 that you would like the overpayment applied to your estimated taxes on Form 1040, Form 1040NR, Form 1040-PR, Form 1040-SS, or Form 1041 for the year in which you're filing the corrected Schedule H. If the corrected Schedule H is filed as a stand-alone return, adjust your return by writing "ADJUSTED" (or "CORREGIDO") in the top margin (in bold letters). If you adjust your return, you won't receive interest on your overpayment. If the corrected Schedule H will be filed within 90 days of the expiration of the refund period of limitations, you may not adjust the return and must claim a refund for the overpayment. You may not adjust your return to correct overpayments of FUTA tax.

Claim for refund process. If the corrected Schedule H is filed with a Form 1040X or an amended Form 1041, claim a refund by indicating that you would like the overpayment refunded to you on line 22 of the Form 1040X or line 29b of the Form 1041. If the corrected Schedule H is filed as a stand-alone return, claim a refund by writing "REFUND" (or "REEMBOLSO") in the top margin (in bold letters). You will receive interest on any overpayment refunded, unless the overpayment is for FUTA tax because you were entitled to increased credits for state contributions.

Required repayment or consent. If you previously overreported social security and Medicare taxes, you may adjust your overpayment only after you've repaid or reimbursed your employees the amount of the overcollection of employee tax. You reimburse your employees by applying the overwithheld amount against taxes to be withheld on future wages. You may claim a refund for the overpayment only after you've repaid or reimbursed your employees the amount of the overcollection or you've obtained consents from your employees to file the claim for refund for the employee tax. Include a statement that you repaid or reimbursed your employees, or obtained their written consents in the case of a claim for refund, in Part III of Form 1040X or in a statement attached to the amended Form 1041 or the stand-alone corrected Schedule H.

Filing required Forms W-2 or Forms W-2c. Whether you previously underreported tax or overreported tax, you will generally be required to file Form W-2, or their territorial equivalents (if none was previously filed), or Form W-2c, Corrected Wage and Tax Statement, to reflect the changes reported on your corrected Schedule H.

Additional Medicare Tax. Generally, you may not correct an error in Additional Medicare Tax withholding for wages paid to employees in a prior year unless it is an administrative error. An administrative error occurs if the amount you entered on Schedule H isn't the amount you actually withheld. For example, if the Additional Medicare Tax actually withheld was incorrectly reported on Schedule H due to a mathematical or transposition error, this would be an administrative error. If a prior year error was a nonadministrative error, you may correct only the wages subject to Additional Medicare Tax withholding.

Any underwithheld Additional Medicare Tax must be recovered from employees on or before the last day of the calendar year in which the underwithholding occurred. Any excess Additional Medicare Tax withholding must be repaid or reimbursed to employees before the end of the calendar year in which it was withheld.

Additional information. For more information about correcting errors on a previously filed Schedule H, see page 4 of Form 944-X, Form 944-X: Which process should you use? (substitute "Schedule H" for "Form 944-X") and the Instructions for Form 944-X (or Formulario 944-X (PR)). Also, visit IRS.gov.

How To Get Tax Help

If you have questions about a tax issue, need help preparing your tax return, or want to download free publications, forms, or instructions, go to IRS.gov and find resources that can help you right away.

Preparing and filing your tax return. Find free options to prepare and file your return on IRS.gov or in your local community if you qualify.

The Volunteer Income Tax Assistance (VITA) program offers free tax help to people who generally make $54,000 or less, persons with disabilities, the elderly, and limited-English-speaking taxpayers who need help preparing their own tax returns. The Tax Counseling for the Elderly (TCE) program offers free tax help for all taxpayers, particularly those who are 60 years of age and older. TCE volunteers specialize in answering questions about pensions and retirement-related issues unique to seniors.

You can go to IRS.gov and click on the Filing tab to see your options for preparing and filing your return which include the following.

Using direct deposit. The fastest way to receive a tax refund is to combine direct deposit and IRS e-file. Direct deposit securely and electronically transfers your refund directly into your financial account. Eight in 10 taxpayers use direct deposit to receive their refund. IRS issues more than 90% of refunds in less than 21 days.

Delayed refund for returns claiming certain credits. Due to changes in the law, the IRS can't issue refunds before February 15, 2017, for returns that claim the earned income credit (EIC) or the additional child tax credit (ACTC). This applies to the entire refund, not just the portion associated with these credits.

Getting a transcript or copy of a return. The quickest way to get a copy of your tax transcript is to go to IRS.gov/transcripts. Click on either Get Transcript Online or Get Transcript by Mail to order a copy of your transcript. If you prefer, you can:

Understanding an IRS notice or letter. Go to IRS.gov/notices to find additional information about responding to an IRS notice or letter.

Contacting your local IRS office. Keep in mind, many questions can be resolved on IRS.gov without visiting an IRS Tax Assistance Center (TAC). Go to IRS.gov/letushelp for the topics people ask about most. If you still need help, IRS TACs provide tax help when a tax issue can't be handled online or by phone. All TACs now provide service by appointment so you'll know in advance that you can get the service you need without waiting. Before you visit, go to IRS.gov/taclocator to find the nearest TAC, check hours, available services, and appointment options. Or, on the IRS2Go app, under the Stay Connected tab, choose the Contact Us option and click on "Local Offices."

Watching IRS videos. The IRS Video portal (IRSvideos.gov) contains video and audio presentations for individuals, small businesses, and tax professionals.

Getting tax information in other languages. For taxpayers whose native language isn't English, we have the following resources available. Taxpayers can find information on IRS.gov in the following languages.

The Taxpayer Advocate Service Is Here To Help You

What is the Taxpayer Advocate Service?

The Taxpayer Advocate Service (TAS) is an independent organization within the IRS that helps taxpayers and protects taxpayer rights. Our job is to ensure that every taxpayer is treated fairly and that you know and understand your rights under the Taxpayer Bill of Rights.

What Can the Taxpayer Advocate Service Do For You?

We can help you resolve problems that you can't resolve with the IRS. And our service is free. If you qualify for our assistance, you will be assigned to one advocate who will work with you throughout the process and will do everything possible to resolve your issue. TAS can help you if:

We have offices in every state, the District of Columbia, and Puerto Rico. Your local advocate's number is in your local directory and at taxpayeradvocate.irs.gov. You can also call us at 1-877-777-4778.

How Can You Learn About Your Taxpayer Rights?

The Taxpayer Bill of Rights describes 10 basic rights that all taxpayers have when dealing with the IRS. Our Tax Toolkit at taxpayeradvocate.irs.gov can help you understand what these rights mean to you and how they apply. These are your rights. Know them. Use them.

How Else Does the Taxpayer Advocate Service Help Taxpayers?

TAS works to resolve large-scale problems that affect many taxpayers. If you know of one of these broad issues, please report it to us at IRS.gov/sams.

Low Income Taxpayer Clinics

Low Income Taxpayer Clinics (LITCs) serve individuals whose income is below a certain level and need to resolve tax problems such as audits, appeals, and tax collection disputes. Some clinics can provide information about taxpayer rights and responsibilities in different languages for individuals who speak English as a second language. To find a clinic near you, visit IRS.gov/litc or see IRS Publication 4134, Low Income Taxpayer Clinic List.