The CA household employer payroll taxes are paid to the Employment Development Department. They are not paid as part of the state income tax.
Are such employer payroll taxes deductible on Form 1040? If so, where is that amount reported on Form 1040?
If CA household employer payroll taxes are not deductible because they are paid separately, it would seem unfair if other states include household employer payroll taxes in "income" taxes, as Form 1040 does (Sched H). In such cases, the household employer payroll tax would effectively be deductible because it is "hidden" in the state income tax deduction on Sched A.
State and federal income tax withholding, FICA, FUTA, SUI, and CA-SDI for household employees are not deductible for either federal or state income tax purposes. If the person was employed in your trade or business, you could deduct the salary and the payroll taxes as business expenses. Such payments on behalf of a household employee are nondeductible personal expenses.
If you withhold FIT or SIT for your household employee, that represents the employee's federal or state income tax liability which you withhold and forward to the government on your employee's behalf. It has nothing to do with your own income tax. CA-SDI (state disability insurance), if your employee is subject, is also withheld from the employee's wages. Again, it is your employee's expense, not yours, and it is not income tax.
State unemployment insurance (SUI) is a tax that you pay into the unemployment insurance fund to provide benefits for workers who become unemployed through no fault of their own. It is not an income tax. Since it is paid on behalf of a household employee, it is a personal, nondeductible expense.
On Schedule H (Form 1040) you also report and pay the employer's half of FICA (Social Security and Medicare), which is your personal, nondeductible expense, and pay over the employee's half, which you have withheld from your employee's compensation. These are not income taxes and are not treated as such by either IRS or any state.
No, unless they're part of the expense of providing deductible medical care. They are never deductible as taxes.
Yes it would seem unfair, but that's not the reason they're not deductible. They're not deductible because they're not among the deductible state and local taxes, and that's the case regardless of how they're paid to the state.
A similar case occurs in connection with many property tax bills, which often include nondeductible charges such as trash and water.
Thank you for answering this question! I have a similar question and tried to call the IRS for help to no avail.
For our nanny for 2007, we withheld federal taxes (income, medicare, social security, futa, etc.) and made estimated payments to the IRS for these payments. We also made similar estimated payments to the state for state income taxes as well as state unemployment taxes.
Could someone confirm that the following is a correct description of how to report this on the 1040?
1) Schedule H is completed with regard to the federal obligations due for the employee and the total amount of federal taxes due (both from the employee's withholdings and the employer's portion) is reported on line 62 of form 1040.
2) all estimated federal tax payments (whether for the employee's withheld portion or the employer's portion of social security and medicare) are added together and reported on line 65 of form 1040.
3) any payments made to the state taxing authority for estimated state income taxes for the employee are NOT counted in the employer's state income tax deductions in Schedule A, line 5a.
4) any payments made to state unemployment agencies for the employee are NOT eligible to be deducted as "other state taxes" on Schedule A, line 8.
Thank you! There is absolutely no information about this on the IRS website.
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