The tax rates mentioned in the instructions for Part I and Part II of Schedule H will not change. Also, the cash wage threshold that you pay to any one household employee remains at $1,700 for 2011. The 2011 Employee Social Security and Medicare Tax Withholding Table is in Pub. 926.

The limit on wages subject to social security tax remains at $106,800 for 2011.

The option of receiving advance payroll payments of EIC expires on December 31, 2010. Individuals eligible for EIC in 2011 can still claim the credit when they file their federal income tax return.

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 26 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, which 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 10, 2011.

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 2010 tax returns.

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, Form 1040NR, or Form 1040-SS, file Form 1040X and attach a corrected Schedule H. If you discover an error on a Schedule 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 ink if possible) CORRECTED 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, then depending on whether you adjust or claim a refund, you must certify that you repaid or reimbursed the employee's share of social security and Medicare taxes, or that you have obtained consents from your employees to file a claim for refund for the employee tax. See Pub. 926 for complete instructions.

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