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2011 Household Employer's Schedule H Updates

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The Form 1040 Schedule H is the vehicle that household employers use to report wages paid and employment taxes due for household workers. This form is a bit more complex for 2011 due to 2 significant events.

1. In 2011 the Federal Unemployment Tax (FUTA) rate changed mid-year. If you fully paid your state unemployment taxes on time, you receive a credit and pay an effective rate of 0.8% for FUTA-wages paid January - June and 0.6% for FUTA-wages paid July - December.
2. 20 states who took Federal loans to continue funding the payment of unemployment benefits are in arrears in their repayment of the loans. As a consequence, employers in these states (called Credit Reduction States) have surcharges imposed on their FUTA taxes.

• Eighteen states and one territory will have a credit reduction of 0.3%: Arkansas, California, Connecticut, Florida, Georgia, Illinois, Kentucky, Minnesota, Missouri, North Carolina, New Jersey, Nevada, New York, Ohio, Pennsylvania, Rhode Island, Virginia, Virgin Islands and Wisconsin.
• Michigan will have a total credit reduction of 0.9% (0.6% in 2010).
• Indiana will have a total credit reduction of 0.6% (0.3% in 2010).

For background information about the credit reductions, visit this website. If you live in a Credit Reduction state you may be prohibited from e-filing your Federal return this year. The IRS' e-filing systems are apparently not equipped to accept the "Worksheet for Household Employers in a Credit Reduction State" which is necessary to compute FUTA tax owed.

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