Schedule H, line 20 is incorrect in TurboTax desktop

[MoleculeG0]

Hello,

I'm inputting Nanny taxes, the (Schedule H) information, into TurboTax desktop.  However, line 20 is incorrect and I am not sure if I need to manually fix.

IRS rules for line 20 (see line 15 instructions) states "If you paid any household employee more than $7,000 in 2022, include on line 15 only the first $7,000 of that employee's cash wages."

As a simple example, let's say I had 3 employees which I paid A = $10K, B = $8K, and C= $6K.  TurboTax is showing line 20 as the full $24K, when it should only be $20K.

TurboTax does not seem to take information from the [Deductions & Credits] section of the child expense entries where the 3 employees were broken out.  All other "step-by-step" fields for the Schedule H are entered correctly (as subject to social security and medicare should be $24K, but subject to FUTA should only be $20K).

Do I need to go into the forms and manually correct them?

Thanks

[DianeW777]

No, you should not have to do that.  When you are completing your Schedule H, you need to know how much of the wages for each person that will be taxed for unemployment tax by your state.  Each state is different and not all states use the same amount as federal for unemployment tax. It's important to be sure you have paid that tax.

• The maximum wages for federal unemployment tax on wages is the first $7,000, assuming you paid more than $1,000 in any calendar quarter.
• Pennsylvania (PA), as example, has an amount of $8,000 and their own tax rate (example might be 3.5%)

If your state unemployment tax has been paid on time then your federal rate is dramatically reduced. More information can be found in the Schedule H instructions about credit reduction states. Check to see if your state falls into this category.

FUTA tax rate: The FUTA tax rate is 6.0%. The tax applies to the first $7,000 you paid to each employee as wages during the year. The $7,000 is often referred to as the federal or FUTA wage base.  In your scenario this should be $1,200 ($7,000 + $7,000 + $6000 x .06)

1. Sign into your TurboTax account > Search (upper right) type nanny tax > Select the Jump to ... Link
2. Answer Yes you have household employees > Yes you paid more than $2,400 to at least one employee > enter your EIN > Continue
3. Enter your wages subject to social security tax and medicare tax, also federal withholding if applicable
4. Continue to Unemployment Tax Information > Continue > Check the appropriate state unemployment tax questions
5. Do not check that all wages are taxable for FUTA > Continue > Enter your state information > Continue
6. Enter the wages that are subject to FUTA ($20,000 in your example)
7. Once completed you should see the correct result of Schedule H tax.
8. See the image below for assistance.

[MoleculeG0]

Hi Diane,

I am in CT, a credit reduction state.

SurePayroll has provided the prepared Schedule H, which I believe to be accurate.  In your screenshot, they have the boxes at the top as box 10 "No",  box 11 "Yes", and box 12 "Yes".

The state wages in their Schedule H (line 17b) shows the full "$24K".  In the "Worksheet 2" for credit reduction, they list FUTA taxable wages as $20K with the reduction rate of x .003.

So it seems my problem remains that FUTA taxable wages are $20K, but state taxable wages are still the full $24K, is that correct?

Regarding that 3rd box (box 12 being a "Yes"), that sounds right as that $20K is still fully taxable according to the state (as FUTA taxable $20K < state taxable $24K).  Unless perhaps I deselect/set box 12 to "No", I'm not seeing a way in TT to modify the FUTA amount to a lower number.

Thanks

[ThomasM125]

When you go through the questions in the nanny tax section of TurboTax, you should see a screen that says Wages for FUTA. That is where you should enter the federal taxable FUTA wages. 

[MoleculeG0]

Hi Thomas,

That question will only come up if the box (12) is not selected for "All the wages that are taxable for the Federal Unemployment Tax Act (FUTA) are also taxable for my state unemployment tax."  If that box is selected (set to Yes), then TurboTax does not ask for the FUTA amount.

The issue for me is the wording, as I select "Yes" because not only is all $20K taxable for my state, but they also will tax the $4K more.  If I was to say not all of the $20K is taxable for CT, that sounds like it would be less than $20K, not more.  Although that's how the IRS has the Schedule H designed for the wording on that particular box, I believe TurboTax should still ask for the FUTA amount.  More like "Are the FUTA and state taxable amounts the same?  If not, enter/update the value".

Or, perhaps TurboTax should prompt the user for that FUTA entry in your screenshot no matter what is selected for box 12.

At the moment, it seems my only option to get the correct amount in there is to have box 12 as a No.  I appreciate the comments and workaround!

Thanks

[DianeW777]

You are correct.  Connecticut (CT) is one of the states that has an outstanding loan with the federal government.  For this reason all of the FUTA rate is higher in your state.

• As Connecticut has an outstanding loan balance, Connecticut employers will have a FUTA tax increase of 0.3%, applied to payroll paid from January 1, 2022, through December 31, 2022 (click here for the CT rates in 2023).

Also, CT uses the first $15,000 paid to each employee, so as far as CT, the full wage amount of $24,000 must be used to determine the FUTA rate. Review the state question section  to be sure you answer correctly.  If I change the state information to show CT and 24,000 as the 'State Taxable Wages' enter the correct rate of .028  (using from their chart since I do not know your rate) then click continue, continue and enter the FUTA wages.  You will arrive at the correct amount on Schedule H.

If you still have concerns you can send us a “diagnostic” file that has your “numbers” but not your personal information.  If you would like to do this, here are the instructions: 

TurboTax Online:

Go to the black panel on the left side of your program and select Tax Tools. 

1. Then select Tools below Tax Tools. 
2. A window will pop up which says Tools Center.  
3. On this screen, select Share my file with Agent. 
4. You will see a message explaining what the diagnostic copy is.  Click okay through this screen and then you will get a Token number. 
5. Reply to this thread with your Token number. This will allow us to open a copy of your return without seeing any personal information.  

TurboTax CD/Download:

If you like, you can send a copy of your return that will be scrubbed to eliminate your personal data by using these steps:

1. Click on Online in the top left menu of TurboTax CD/Download for Windows
2. Select 'Send Tax File to Agent'
3. Write down or send an image of your token number then place in this issue.
4. We can then review your exact scenario for a solution.

We will then be able to see exactly what you are seeing and we can determine what exactly is going on in your return and provide you with a resolution. 

@MoleculeG0 

[MoleculeG0]

Hi Diane @DianeW777 ,

Token # is 1079228

I deselected box 12 so that I could enter the FUTA amount individually.  This did not solve all the issues because now it does not appear that TurboTax is handling the credit reduction amount.  In the TurboTax Forms, Schedule H worksheet area for "Line 23 - Employers in a Credit Reduction State Smart Worksheet", row 3 lists "CT" but then next to it is blank--TT never populated the taxable value from the step-by-step.  Therefore, the credit reduction value is not populated/calculated.  I believe the amount populated in here should be the ~$20K (since instructions here are asking for the federal amount, not the state amount) * credit reduction rate of .003 would be $63.

I believe my experience rate to be (3%) .03.  SurePayroll did not populate the experience rate in their prepared Schedule H for me but according to the IRS instructions, it should be populated saying "If you were given a rate of less than 5.4%, you must complete all columns".  Oddly enough, keeping experience rate blank vs. filling in 3% seems to have absolutely no impact (in the refund amount) either way.

Please let me know what you find!  Very much appreciated!

[DianeW777]

Thank you.  If you could reply to provide the states you have in your return that would be helpful.

[MoleculeG0]

Hi @DianeW777 

Only Connecticut (CT).

Box 10 is selected as "No" due to CT being a credit reduction state.

Thanks

[DianeW777 · Accepted solution]

Yes, Box 10 should be selected as no. I appreciate your information, I am unable to load your tax return however based on the wages in your example, the credit for CT as a credit reduction state is $60 and the full payment is correct and entered on Line 26, then carried to Schedule 2, Line 9.  Below is a picture of my example.  Thank you for your patience.

[MoleculeG0]

Hi @DianeW777 

No problem and thanks for going through it.  Can you confirm-- did you have to go into the Forms and manually enter that $20K into the (worksheet) line 23, item #3 next to CT?  When I go through the step-by-step, only "CT" populates and not the value.

Thanks again for your support!

[DianeW777]

Yes, I did have to enter it in the Line 23 -Employers in a Credit Reduction State Smart Worksheet (20,000). Then you should be ready to finish your return.

[brandauer]

It's 4/7. I've updated my MAC desktop Home and Business, filing in CA.  My schedule H has been updated. But TT is still rejecting my return because of the schedule H. I got an email from TT on 4/6 saying the issue was resolved. I updated my program that day. I updated Form 1040, schedule H questions that day. I ran my returns and TT accepted both but shortly thereafter, the TR's were rejected by FED and CA. I went in today (4/7) and tried to update again, but no new updates. I tried to run the return again, but now TT is rejecting the fed and CA TR. What should I do? It sounds like others who had this issue are fine?

[earth777]

Hello @brandauer 

i am having the exact same issue as you with minor differences

- i am on WIN H&B edition.. you are on MAC.  i was told to apply a master patch but clearly this is not the issue as we both have the same issue on WIN and MAC

- i received an email last night 10pm California time saying the issue is being worked (even thought the s/w update push seems to have resolved it on 4/6 with the Sch H questions now including consideration for CA, NY, IL etc) - email pasted below from evening of 4/6.  not sure if this was triggered by the 2nd rejection yesterday morning (email from TT indicated the following reason again:  FED_SchH_FUTA - There is an issue related to Schedule H, Household Employee Taxes)

so basically there is a timing issue..S/W is fixed but someone (TT or IRS) needs to be informed to allow returns to flow.  reason is rejection occurs in minutes so clearly programed to do so and my schedule H is completed properly (as checked by my nanny employer agency)

regards

"Dear TurboTax customer,
Thank you for being patient while we investigate your issue.
Rest assured, we're working tirelessly on a solution and will email you when we have more information.
Thank you for being a TurboTax customer.
Sincerely,
TurboTax"

[earth777]

check out this post.. someone is reporting success.  it might be a timing issue.  do you recall when you submitted yesterday 4/6?   

https://ttlc.intuit.com/community/taxes/discussion/re-in-turbotax-for-filers-who-have-to-report-hous...