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Home Glossary More Links Ask Forum Calculate Federal Summary Federal Forms FEDERAL SUMMARY A more detailed explanation is available in the IRS's Publication 926, Household Employer's Tax Guide First, determine if you are legally a household employer (see Home page link, or the government's tax guides.) Subject to Social Security and Medicare (FICA or SS/MED) if you pay wages of $1400 to any one worker in year 2004. Subject to Unemployment (FUTA) if you pay combined household wages of $1000 in any calendar quarter of 2004 or the prior year. Income tax withholding is optional. The employer registers and obtains an employer ID number from the IRS. Use Form SS-4, Application for Employer Identification Number. For each new worker, the employer completes INS Form I-9, Employment Eligibility Verification. Follow the I-9 Form's instructions for determining that the employee is eligible to work in the U.S. Sign the form and keep it in your records. We recommend also keeping a copy of the documents you used to verify eligibility. The most frequently used documents are a driver's license plus a social security card. If the worker and employer agree that income taxes are to be deducted, then the worker completes Form W-4, Employee's Withholding Allowance Certificate. Keep the W-4 form in your records with the I-9. The employer deducts Social Security tax (part of "FICA") from the worker's paycheck and pays an equal matching amount to the IRS. The tax is deducted from the worker's pay and later transmitted with the payroll tax returns to the IRS by the employer. The 2004 rate to deduct from the paycheck is 6.2 percent applicable to the first $87,900 of wages paid per worker in the calendar year. The amount paid to the IRS is double that, or 12.4 percent. The employer deducts Medicare tax (part of "FICA") from the worker's paycheck and pays an equal matching amount to the IRS. The tax is deducted from the worker's pay and later transmitted with the payroll tax returns to the IRS by the employer. The 2004 rate to deduct from the paycheck is 1.45 percent applicable to all wages paid. The amount paid to the IRS is double that, or 2.9 percent. The employer may optionally deduct income taxes from the worker's paycheck. For long-term employees who will earn enough to owe taxes at the end of the year, we recommend that you deduct income taxes, though this is optional based upon agreement between the worker and the employer. The employer pays federal Unemployment tax ("FUTA".) This tax is not deducted from the worker's pay. It is paid with the payroll tax return(s) mentioned below. It is applicable to the first $7000 of wages paid per worker in calendar year 2004. The rate is usually 0.8 percent, but may vary under certain circumstances. The employer annually files Schedule H, Form 1040 The employer pays all employment taxes, including withheld taxes, with their Form 1040, Schedule H. Don't forget to adjust your withholding or quarterly estimated tax payments during the year to avoid a penalty. The employer prepares Forms W-2 annually. The employer must give each employee his W-2 by January 31 of the following year. The employer files Form W-3 annually. This return is used to transmit the federal copy of Forms W-2 to SSA(Social Security Administration.) See our Federal Forms: Federal Forms We respect our visitors: No pop ads. No scumware. No cookies. SSL Secure login. Ask a Question FAQ Search Our Sites Sign Up Home Glossary More Links Ask Forum Calculate Federal Summary Federal Forms

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