Creating a w2 for household employee - paid IRS SSC/Medicare Taxes I wasn’t supposed to?

[Cecamy]

Funny situation, apparently I’m the first one to ever accomplish such a stupid task as I can’t find any one that has answers for me yet, and I’ve called three IRS numbers but none have the correct options for me to get beyond the first menu. 

I paid my mother as a household employee. Under direction of my former employer’s accountant, she told me I was to pay Social Security and Medicare taxes - both employee and employer portions - for my household employee (mother) to the IRS through their EFTPS system. I discovered that because the employee is my parent, we are not required to do these withholdings. A total of $734 was paid to the IRS already. 

Do I just show the total (Both Employer and Employee portions of the SS/Medicare taxes that I wasn’t supposed to pay) amount on a w2 as Federal Income tax withheld so she can get the money back when she files her taxes?  If I show “0” Medicare & SS wages on the W2 but show the withholding numbers, it just says I am supposed to issue her a refund, but then how do I go about getting the money refunded from the IRS? 

Now when I’m running the numbers through TurboTax for my personal taxes, and there is an option to show that income taxes were withheld from the household employee, but it reduces my refund by that amount even though it was already paid to the IRS. Do I show this number as “0” since I’m not holding any of the funds??

Thank you! 

[ThomasM125]

The money you paid through the EFTPS system could be allocated to federal tax withheld if you so choose. That way, your mother would get credit for it on her tax return. I assume you reported the payments on a form 945 Annual Withheld Federal Income Tax or form 941 Employers Federal Tax? (you had to choose one when you made the deposit), you could amend that filing and receive a refund of the overpaid tax, that would be your other option.

 If you report the wages using form 945 or 941, then you don't need to report the wages on your personal tax return on schedule H, since you reported them on the form 941/945.

Ideally, you would complete or amend (if already filed) the form 941/945 to report no wages and get a refund of the money you paid in. Then, you would report the wages on your personal tax return and pay in the taxes with your personal tax return. 

There is also the issue of form 940 for your federal unemployment tax. If you choose to forgo reporting the wages on your personal tax return, you would need to file a form 940 and pay in the small amount of federal unemployment taxes due.

[Cecamy]

I chose form 941 when making the payments, however I did not file the actual paper form 941. Is it too late to do so now?

If/when I file this paper form - would it be better to show the payments as an overpayment and select it to be refunded to me? I am assuming this refund would not come prior to my taxes being due, so I would have to pay again while waiting for said refund?

Should I include a cover letter or letter of explanation with the reasoning for the filing of these forms at this point? They are not required for household employees, so is there going to be a penalty for filing them late, even though they aren’t required?? 

[JamesG1]

Federal form 941 are due thirty days after the end of each quarter so December 31, 2021 is due January 31, 2022.  You still have time to file on a timely basis.

I am presuming that you are reporting your mother’s income and your labor expense in the quarter ending December 31 and not the previous quarters?  Reporting in the previous quarters would be subject you to late filing.

As ThomasM125 said, I would be inclined to reflect the payments as Federal tax withheld to your mother. She would likely get it refunded to her through her W-2 and Federal 1040 tax return quicker than the IRS will refund a 941 payment to you.

If you can meet all the deadlines, a cover letter is not required but may be helpful.

You are subject to:

• Federal form 940 which is due January 31, 2022
• W-2 and W-4 which is due January 31, 2022

You may also be subject to the following:

• State income tax withholding, and
• State workman’s compensation.

You may have to establish accounts with these agencies,

Federal 941

Federal 941 Instructions

Federal 940

Federal 940 Instructions