• People who paid domestic help more than $1,400 will need to file Schedule H, "Household Employment Taxes," with their (Federal) income tax returns.
• If the employer has no 1040 filing requirement, Schedule H must be filed alone.
• If you paid someone to work in or around your home, you may owe employment taxes.  Employment taxes are social security (12.4%), Medicare (2.9%), withheld Federal income, and Federal unemployment (0.8%) (FUTA) taxes.  Employment taxes on wages paid to household workers are now attached to your individual Federal income tax return (Form 1040) and reported on Form H (Household Employment Taxes).  The Form H replaces Form 942 for domestic employees previously required to be filed separately each quarter.
• A household employee is any person who does household work if you can control what will be done, when it will be done, and how it will be done.  Household work includes work done in or around your home by baby sitters, nannies, health aides, maids, yard workers, and similar domestic workers. If you had a household employee during the year and any of the following three conditions apply, you may owe employment taxes on the cash wages (which include payments by check or money order.) that you paid each employee.  The three conditions are:
  1. You paid any one household employee cash wages of $1,400 or more.
  2. You paid total cash wages of $1,000 or more in any calendar quarter to household employees.  A calendar quarter is January through March, April through June, July through September, or October through December.
  3. You withheld Federal income tax during the year at the request of any household employee.  Income tax withholding is required only if the employer and employee agree.
• Payment of employees' withholdings during the year should be sent with the employer's Schedule H.
• Employers have until January 31^st to issue household employees Form W-2 for the previous year’s wages and withholding.
• Household employers need to include their employer identification number (EIN) on Schedule H.  They can request an EIN by filing Form SS-4, "Application for Employer Identification Number."
• Each year, employees' withholding must be paid over by the employer through 1040ES estimated tax payments.
• If you pay household employees less than $1,400 during a calendar year, household employers are not liable for FICA taxes.
• Also, cash wages paid for domestic service in a private home by an individual under 18 during any part of the year are exempt from FICA taxes unless the domestic service is the principal occupation of the employee.

• We recommend that you keep the previous 6 years returns, documentation, and receipts.  The IRS can generally audit the previous 3 years tax returns.  However, there are numerous circumstances in which having these additional three years would be to your advantage, especially if you own your own business.
• MOST IMPORTANTLY, Documentation that will support a deduction or establish a tax basis on a future tax return MUST BE KEPT until the asset is sold.  This refers to your principal residence, mutual funds and stocks, and investments in partnerships just to name a few.  Typically, this means the information must be retained longer than 6 years.
• As a service to you, our client, we will be happy to maintain a copy of this long-term information in our files. In order for us to have complete documentation, would you please send us the following information:

• We would like a copy of the closing statement from the purchase of your home. The closing statement is typically on two long pages.
• We would like a copy of the tax return from the year that you sold your last principal residence.  A Form 2119, Sale of a Principal Residence should be included in that year's tax return.  A lag in time between the sale of one residence and the purchase of another sometimes requires the Form 2119 to be filed in two (usually consecutive) years.  If so, a copy of both returns is necessary.
• We would like a list of any home improvements and the cost to you.  Receipts or other forms of documentation are necessary for the IRS but a list at this time is all that we need.  A home improvement is anything done that extends the life of your home (a new roof, siding) or improves the value of your home (landscaping, planting of trees).

• ALL (from your first purchase to now) year-end statements from the companies which recap your purchases and sales of shares during each year.
• Purchase confirmations from the brokerage houses.

The IRS requires the above documentation to support the net gain reported on the sale of your assets.  The advantage of accumulating this information now is better documentation and therefore, a larger purchase cost and basis for your investments which will result in a lower tax liability in the future.