Publication 926 - Household Employer'S Tax Guide

pay the employee’s share yourself, see Not withholding the

who lose their jobs. Like most employers, you may owe

employee’s share, next.

both the federal unemployment tax (the FUTA tax) and a

You can withhold the employee’s share of the taxes

state unemployment tax. Or, you may owe only the FUTA

even if you are not sure your employee’s cash wages will

tax or only the state unemployment tax. To find out

be $1,400 or more in 2003. If you withhold the taxes but

whether you will owe state unemployment tax, contact your

then actually pay the employee less than $1,400 in cash

state’s unemployment tax agency. See the list of state

wages for the year, you should repay the employee.

unemployment agencies in the Appendix for the address.

Withhold 7.65% (6.2% for social security tax and 1.45%

The FUTA tax is 6.2% of your employee’s FUTA wages.

for Medicare tax) from each payment of social security and

However, you may be able to take a credit of up to 5.4%

Medicare wages. You can use Table 3, later, to figure the

against the FUTA tax, resulting in a net tax of 0.8%. Your

proper amount to withhold. You will pay the amount with-

credit for 2003 is limited unless you pay all the required

held to the IRS with a matching amount for your share of

contributions for 2003 to your state unemployment fund by

the taxes. Do not withhold any social security tax after your

April 15, 2004. The credit you can take for any contribu-

employee’s social security wages for the year reach

tions for 2003 that you pay after April 15, 2004, is limited to

$87,000.

90% of the credit that would have been allowable if the

If you make an error by withholding too little, you should

contributions were paid by April 15, 2004. (If you did not

withhold additional taxes from a later payment. If you

pay all the required contributions for 2002 by April 15,

withhold too much, you should repay the employee.

2003, see Credit for 2002, later.)

Pay the tax as discussed under How Do You Make Tax

Example. You hire a household employee (who is an

Payments, later. Also, see What Forms Must You File,

unrelated individual over age 18) to care for your child and

later.

agree to pay cash wages of $100 every Friday. You expect

to pay your employee $1,400 or more for the year. You

Do not withhold the FUTA tax from your

should withhold $7.65 from each $100 wage payment and

employee’s wages. You must pay it from your

pay your employee the remaining $92.35. The $7.65 is the

own funds.

CAUTION

sum of $6.20 ($100 × 6.2%) for your employee’s share of

social security tax and $1.45 ($100 × 1.45%) for your

employee’s share of Medicare tax. Match the $7.65 you

FUTA wages. Figure the FUTA tax on the FUTA wages

withhold with $7.65 from your own funds when you pay the

you pay. If you pay cash wages to household employees

taxes.

totaling $1,000 or more in any calendar quarter of 2003,

Not withholding the employee’s share. If you prefer to

the first $7,000 of cash wages you pay to each household

pay your employee’s social security and Medicare taxes

employee in 2003 and 2004 is FUTA wages. (A calendar

from your own funds, you do not have to withhold them

quarter is January through March, April through June, July

from your employee’s wages. The social security and

through September, or October through December.) If

Medicare taxes you pay to cover your employee’s share

your employee’s cash wages reach $7,000 during the

must be included in the employee’s wages for income tax

year, do not figure the FUTA tax on any wages you pay that

purposes. However, they are not counted as social secur-

employee during the rest of the year. For an explanation of

ity and Medicare wages or as federal unemployment

cash wages, see the discussion on social security and

(FUTA) wages.

Medicare wages, earlier.

If the cash wages you pay are less than $1,000 in each

Example. You hire a household employee (who is an

calendar quarter of 2003, but you had a household em-

unrelated individual over age 18) to care for your child and

ployee in 2002, the cash wages you pay in 2003 may still

agree to pay cash wages of $100 every Friday. You expect

be FUTA wages. They are FUTA wages if the cash wages

to pay your employee $1,400 or more for the year. You

you paid to household employees in any calendar quarter

decide to pay your employee’s share of social security and

of 2002 totaled $1,000 or more.

Medicare taxes from your own funds. You pay your em-

Wages not counted. Do not count wages you pay to

ployee $100 every Friday without withholding any social

any of the following individuals as FUTA wages.

security or Medicare taxes.

For social security and Medicare tax purposes, your

•

Your spouse.

employee’s wages each payday are $100. For each wage

•

payment, you will pay $15.30 when you pay the taxes. This

Your child who is age 20 or younger.

is $7.65 ($6.20 for social security tax + $1.45 for Medicare

•

Your parent.

tax) to cover your employee’s share plus a matching $7.65

for your share. For income tax purposes, your employee’s

wages each payday are $107.65 ($100 + the $7.65 you will

Example. You hire a household employee (who is not

pay to cover your employee’s share of social security and

related to you) on January 1, 2003, and agree to pay cash

Medicare taxes).

wages of $200 every Friday. During January, February,

and March you pay the employee cash wages of $2,600.

Federal Unemployment (FUTA) Tax

You pay cash wages of $1,000 or more in a calendar

quarter of 2003, so the first $7,000 of cash wages you pay

the employee (or any other employee) in 2003 or 2004 is

The federal unemployment tax is part of the federal and

state program under the Federal Unemployment Tax Act

FUTA wages. The FUTA wages you pay may also be

(FUTA) that pays unemployment compensation to workers

subject to your state’s unemployment tax.

Page 5

Publication 926 - Household Employer'S Tax Guide - 2003 Page 5

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