IRS Schedule H

For the last few weeks I've been preparing to take  the IRS tests to achieve Enrolled Agent status.  This has sucked up most of my spare time and energy, taking away from reading and writing.

But part of getting ready for the first test has entailed having to poke about in some of the obscurer portions of the tax code.  Like Schedule H, for example.  Schedule A is for itemized deductions, Schedule B covers interest and dividends, and Schedule C is for sole proprietorships.  These are the schedules that most people are familiar with.

If you have capital gains, you report them on Schedule D.  Rental income and expense show up on Schedule E, and if you have a farm, you use Schedule F.  I've been trained and have seen all of those on tax returns.  But Schedule H?

It turns out Schedule H is for household employees.  When I first saw this, I thought it was pretty obscure for a test.  I mean, how many people actually have a butler?

However, it turns out you don't actually have to have a staff of full time servants to require this schedule.  If you pay anyone over the age of 18 over $1800 through the course of the year to do work in your home or property, you are required to file Schedule H.  You calculate how much Social Security and Medicare the employee owes, and then you subtract that amount from your refund.

Every so often you hear about a high ranking political appointee failing to pay taxes on a nanny, or a gardener.  It has derailed a couple of candidacies.  I've always wondered why the high powered types who get caught like that didn't just go through an employment agency, like a temp service.  Of course, a temp service adds their markup to the wages and taxes paid to the employee.  So a Schedule H is actually a more cost effective way to go.

So remember: if you hire the neighborhood kid to mow your lawn all summer, make sure he's under age 18.  Otherwise you're cheating on your taxes.

Yeah.  Like we're all quaking in our boots over that one.