The Household Employer Tax Guide: IRS Steps, 2026 Figures

Last updated September 28, 2026

General information, not advice: this page covers tax and employment topics in general terms. It is not tax or legal advice, and reading it does not create a CPA–client relationship. Tax and labor rules vary by state and situation — consult a qualified professional for your circumstances.

Nobody becomes a household employer because they love payroll tax. But the federal rules here are genuinely simpler than business payroll — no quarterly Form 941, no monthly deposits. You file one extra schedule with your tax return each year. This guide walks the full IRS path in order, using 2026 figures from IRS Topic 756 and Publication 926 (2026), the IRS’s own Household Employer’s Tax Guide.

Step 1: Confirm you’re a household employer

The test has two parts — classification, then thresholds.

Classification: A worker is your household employee if you control not only what work gets done but how it gets done. Your nanny, housekeeper, or caregiver who works on your schedule, in your home, following your instructions: employee. The plumber who fixes your sink on his own terms: not your employee. (This is the most expensive misconception in household employment — if you’re unsure, take the household employer quiz.)

Thresholds (2026 figures):

• $3,000+ in cash wages to one worker in the year → you owe Social Security and Medicare taxes (FICA). Cash wages include checks and money orders, not just cash.
• $1,000+ in total cash wages in any calendar quarter → you owe federal unemployment tax (FUTA).

Note the asymmetry: FICA is per-worker, FUTA is aggregate across all household workers. A part-time housekeeper at $100/week for 30 weeks hits exactly $3,000 — right on the FICA boundary (see housekeeper payroll specifics).

Exclusions you should know: you don’t owe FICA on wages paid to your spouse, your child under 21, your parent (with an exception for childcare that lets the parent work, in some cases), or a worker under 18 at any time during the year unless household work is their principal occupation — a student babysitter after school is the classic exempt case.

Step 2: Get a free EIN from IRS.gov

You need an Employer Identification Number to file household employment taxes. Get it directly from the IRS — it’s free, takes minutes, and the IRS issues it immediately online. This bears repeating because paid “EIN filing services” advertise heavily and charge $50–$300 for something the IRS gives you for nothing. Never pay for an EIN.

Apply at IRS.gov’s EIN assistant as a sole proprietor household employer (you’re not creating a business entity — you just need the number for tax filings).

Step 3: Register with your state

Federal compliance is only half the job. Most states require you to:

1. Open a state unemployment insurance (UI) account — this gets you a state UI account number and a new-employer tax rate. You generally must file quarterly wage reports with the state even though federal filing is annual.
2. Handle new-hire reporting — most states require you to report new hires within ~20 days of their start date (usually to the state directory of new hires, which is used for child-support enforcement).
3. Check workers’ comp requirements — most states require household employers to carry workers’ compensation insurance; a few don’t (state table).

Your state’s labor department or department of revenue website will have a “new employer” or “household employer” registration path. A payroll service does all of this for you — which is most of what you’re paying for (see payroll services compared).

Step 4: Withhold and pay FICA through the year

If you hit the $3,000 threshold for a worker, two taxes apply to their cash wages:

• Your share (employer): 7.65% — 6.2% Social Security (up to the 2026 wage base of $184,500) + 1.45% Medicare (no cap). You pay this out of your own pocket.
• Their share (employee): 7.65% — same split. You normally withhold this from each paycheck. Or you can choose to pay it yourself as a perk — but know the Topic 756 subtlety: employer-paid employee FICA counts as taxable wages for income tax purposes (though not for FICA or FUTA). Our gross-up calculator handles this with a toggle.

Unlike business employers, you don’t make periodic federal tax deposits for household employees. You settle up once a year — see Step 5. (You can increase withholding on your own W-2 job or make estimated payments to cover the liability through the year if you prefer.)

Federal income tax withholding is optional and requires a signed agreement (Form W-4) from the employee. Many household employers skip it; the employee then handles their own income tax. Decide at hiring time and put it in the work agreement.

Step 5: File Schedule H with your Form 1040

Schedule H (“Household Employment Taxes”) is filed once a year, attached to your personal Form 1040. It reports:

• Total cash wages paid to household employees
• The Social Security, Medicare, and Additional Medicare taxes owed (employer + employee shares)
• FUTA tax owed
• Federal income tax you withheld (if any)

This is the key simplification vs. business payroll: no Form 941, no quarterly federal filings, no monthly deposits. One schedule, once a year. (Additional Medicare Tax: if you pay a single employee more than $200,000 in the year, you must withhold an extra 0.9% on wages above $200,000 — employee-only, no employer match. Rare for household employment, but it’s in the rules.)

If you owe a lot in household employment taxes, watch out for underpayment penalties on your 1040 — the IRS expects the money during the year via your own withholding or estimated payments, even though the reporting is annual.

Step 6: Furnish W-2s by January 31

For every household employee you paid $3,000+ in cash wages (2026 figure), you must:

1. Give them Form W-2 (copies B and C) by January 31
2. File Copy A with the Social Security Administration by January 31

File Copy A electronically through the SSA’s Business Services Online — paper filing is slower and error-prone. If you paid someone less than $3,000, no W-2 is required (though some employers issue one anyway for the worker’s records).

Common W-2 mistakes for household employers: using the wrong EIN, forgetting that employer-paid employee FICA is income-tax wages (Box 1) but not Social Security/Medicare wages (Boxes 3/5), and missing the January 31 deadline entirely. A payroll service does this automatically.

Step 7: Quarterly vs. annual — what you actually file when

The federal/state split confuses everyone, so here it is plainly:

No Form 941 for household employees. If a payroll provider or an internet article tells you to file quarterly 941s for your nanny, that’s business-payroll advice misapplied — household employment is specifically excluded from 941 filing.

Step 8: The FUTA trigger, precisely

You owe FUTA for the year if you paid $1,000 or more in total cash wages to household employees in any calendar quarter of the current or preceding year. The rate is 6% on the first $7,000 of each employee’s wages, but the effective rate is 0.6% ($42 per employee per year) as long as you pay your state unemployment taxes on time — the federal credit does the rest. It’s reported on Schedule H along with everything else.

Year-one timeline checklist

January (hire month):

• Get your free EIN from IRS.gov
• Register for a state unemployment insurance account
• Check your state’s workers’ comp requirement and get a policy if required
• Decide: withhold employee FICA (standard) or pay it yourself; decide on federal income tax withholding
• File new-hire report with the state within ~20 days of the start date
• Put pay rate, schedule, PTO, and tax decisions in a written work agreement

Through the year:

• Pay wages on your agreed schedule; withhold the employee’s 7.65% FICA from each check (unless you pay it yourself)
• File state quarterly UI wage reports (or confirm your payroll service does)
• Adjust your own W-2 withholding or estimated payments to cover the coming Schedule H liability
• Track any overtime hours and pay 1.5× — overtime rules here

January (following year):

• Furnish W-2s to employees by January 31
• File W-2 Copy A with the SSA by January 31

April (following year):

• File Schedule H with your Form 1040, paying the year’s household employment taxes

DIY or payroll service?

Doing it yourself costs nothing but time: the federal side is genuinely one schedule a year, but the state quarterly reports, new-hire reporting, and W-2 filing are where DIY filers slip. A payroll service ($49–$75/month from the major providers) buys you all of it plus a help line when something odd happens — which, honestly, is what you’re really paying for. Compare them in our nanny payroll services guide, or price the DIY path against the true cost of a nanny model.

Sources: IRS Topic 756 — Employment taxes for household employees · IRS Publication 926 (2026) — Household Employer’s Tax Guide. Figures above are 2026 figures; the IRS adjusts the $3,000 FICA threshold periodically, so re-check each year.