The tax rates mentioned in the instructions for Part I and Part II of Schedule H will not change. However, the cash wage threshold that you pay to any one household employee increases to $1,700 for 2009. The 2009 Employee Social Security and Medicare Tax Withholding Table is in Pub. 926, Household Employer's Tax Guide.

The $102,000 amount in the instructions for Part I of Schedule H will increase to $106,800.

The monthly exclusion for commuter highway vehicle transportation and transit passes increases to $120.

You may need to increase the federal income tax withheld from your pay, pension, annuity, etc. or make estimated tax payments to avoid an estimated tax penalty based on your household employment taxes shown on line 27 of Schedule H. You may increase your federal income tax withheld by filing a new Form W-4, Employee's Withholding Allowance Certificate, or Form W-4P, Withholding Certificate for Pension or Annuity Payments. Make estimated tax payments by filing Form 1040-ES, Estimated Tax for Individuals. For more information, see Pub. 505, Tax Withholding and Estimated Tax.

You will not be penalized for failure to make estimated tax payments if both 1 and 2 below apply for the year.

1. You will not have federal income tax withheld from wages, pensions, or any other payments you receive.
2. Your income taxes, excluding your household employment taxes, would not be enough to require payment of estimated taxes.

You must keep copies of Schedule H and related Forms W-2, W-3, W-4, and W-5, Earned Income Credit Advance Payment Certificate, for at least 4 years after the due date for filing Schedule H or the date the taxes were paid, whichever is later. If you have to file Form W-2, also keep a record of each employee's name and social security number. Each payday, you should record the dates and amounts of:

• Cash and noncash wage payments.
• Any employee social security tax withheld.
• Any employee Medicare tax withheld.
• Any federal income tax withheld.
• Any advance EIC payments you made.

The EIC is a refundable tax credit for certain workers.

You must notify your household employee about the EIC if you agreed to withhold federal income tax from the employee's wages but did not do so because the income tax withholding tables showed that no tax should be withheld.

You must give the employee one of the following:

• The official IRS Form W-2, that has the required information about the EIC on the back of Copy B.
• A substitute Form W-2 with the same EIC information on the back of the employee's copy that is on Copy B of the official IRS Form W-2.
• Notice 797, Possible Federal Tax Refund Due to the Earned Income Credit (EIC).
• Your written statement with the same wording as Notice 797.

If you are not required to give the employee a Form W-2, you must provide the notification by February 9, 2009.

You must hand the notice directly to the employee or send it by First-Class Mail to the employee's last known address.

Eligible employees claim the EIC on their 2008 tax returns.

Eligible employees who have a qualifying child can get part of the credit with their pay during the year by giving you a completed Form W-5 or Form W-5(SP), its Spanish translation. You must include advance EIC payments with wages paid to these employees. For details, including tables that show you how to figure the amount to add to the employee's net pay, see Pub.15 (Circular E), Employer's Tax Guide.

Do not use Schedule H if you chose to report employment taxes for your household employees along with your other employees on Form 941, Employer's QUARTERLY Federal Tax Return, Form 943, Employer's Annual Federal Tax Return for Agricultural Employees, or Form 944, Employer's ANNUAL Federal Tax Return. If you report this way, be sure to include your household employees' wages on your Form 940, Employer's Annual Federal Unemployment (FUTA) Tax Return.

Certain state disability plan payments to household employees are treated as wages subject to social security and Medicare taxes. If your employee received payments from a plan that withheld the employee's share of social security and Medicare taxes, include the payments on lines 1 and 3 of Schedule H and complete the rest of Part I through line 5. Add lines 2, 4, and 5. From that total, subtract the amount of these taxes withheld by the state. Enter the result on line 6. Also, enter disability and the amount subtracted on the dotted line next to line 6. See the notice issued by the state for more details.

If you discover an error on a Schedule H that you previously filed with Form 1040, 1040NR, or Form 1040-SS, file Form 1040X and attach a corrected Schedule H. If you discover an error on a Sched ule H that you previously filed with Form 1041, file an Amended Form 1041 and attach a corrected Schedule H.

If you discover an error on a Schedule H that you filed as a stand-alone return, file another stand-alone Schedule H with the corrected information. In the top margin of your corrected Schedule H write (in red) ADJUSTED followed by the date you discovered the error.

If you owe tax, pay in full with your Form 1040X, Form 1041, or stand-alone Schedule H. If you overpaid tax on a previously filed Schedule H, you must certify that you repaid or reimbursed the employee's share of social security and Medicare taxes. See Pub. 926, Household Employer's Tax Guide, for complete instructions.

To get the IRS forms and publications mentioned in these instructions (including Notice 797), visit the IRS website at www.irs.gov or call 1-800-TAX-FORM (1-800-829-3676).