How did Virginia's annual withholding option work for employers whose workers performed only household service?

Plain-English summary

Virginia explained a new annual filing option for employers whose employment consisted exclusively of household service in the employer's private home. The option applied to wages paid on or after January 1, 2013 and no longer depended on keeping quarterly payroll at or below $5,000.

A household employer electing annual Virginia income-tax withholding had to register with the Department on Form R-1H. The employer then filed Form VA-6H annually, reporting payroll by quarter and reconciling any prior payments credited to the annual account.

Form VA-6H had to include a state copy of Form W-2 for every household employee, including employees for whom no tax was withheld. The return, statements, and payment were due February 28 after the calendar year; the first return under the amended rule was due February 28, 2014.

The annual-return obligation continued until the employer permanently closed the account and notified the Department. A late annual or final return was subject to the same penalty and interest rules as other withholding returns.

What this means for you

• The annual option covered only qualifying household service in a private home.
• The former $5,000-per-quarter payroll ceiling was removed for wages paid beginning in 2013.
• Registration was required before using annual Virginia income-tax withholding.
• Every employee's state Form W-2 accompanied the annual return, even if no tax was withheld.
• This bulletin is historical; verify current forms and deadlines before filing today.

Common questions

Q: Did a household employer qualify regardless of payroll size?
A: Under the 2013 change described in the bulletin, yes; the former quarterly payroll cap was eliminated.

Q: Which annual return did the employer file?
A: Form VA-6H, accompanied by the state Form W-2 for each household employee.

Q: When was the annual filing due?
A: February 28 following the calendar year covered by the return.

Q: Could the employer simply stop filing after no longer hiring household help?
A: No. The bulletin required notice to close the account and a final return by the following February 28.

Citations and references

• Va. Code § 60.2-511.
• Virginia Tax Bulletin 13-10.
• Forms R-1H, VA-6H, R-3, and W-2, as described in the bulletin.

Subject

Virginia household-employer annual withholding

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 13-146

Original ruling text

TAX BULLETIN 13-10
Virginia Department of Taxation

JULY 30, 2013

IMPORTANT INFORMATION REGARDING

VIRGINIA HOUSEHOLD EMPLOYER ANNUAL WITHHOLDING

Legislation enacted during the 2012 General Assembly session created the opportunity for employers of household employees to file payroll and tax reports and pay the unemployment tax required by Va. Code § 60.2-511 on an annual basis with the Virginia Employment Commission (“VEC”), effective for wages paid on or after January 1, 2013.

In order to qualify for the annual filing, the employment must consist exclusively of household service in the private home of the employer, as defined in the Federal Employment Tax Regulations.

The legislation eliminated the requirement that an employer’s total payroll in each calendar quarter may not exceed $5,000. As a result of this legislation, household employers may file on an annual basis, regardless of the amount of total payroll. This change will be effective for wages paid on or after January 1, 2013, and the first annual withholding tax return under the amended law will be due on February 28, 2014.

HOUSEHOLD EMPLOYERS WHO ELECT TO WITHHOLD INCOME TAXES ANNUALLY

If a Virginia household employer wishes to file and pay the Virginia income tax withheld from their employees’ salaries on an annual basis, he must register with the Department. In order to register for annual withholding, the employer must complete and file Form R-1H, Household Employer Annual Withholding Registration Form, with the Department. This registration may be completed at any time during the year. If the employer changes his address or permanently discontinues using household employees, he must send either a completed Form R-3, Registration Change Request, or a letter to the Department.

Annually, the employer will be required to file a Form VA-6H, the Household Employer’s Annual or Final Summary of Virginia Income Tax Withheld Return. This form will also be used to report the payroll amounts for each quarter. If the employer has already filed withholding tax returns related to the applicable time period, any prior payments that were made with those returns will be applied to the new annual filing account, and will be reconciled on the Form VA-6H.

When filing Form VA-6H, it must be accompanied by a Wage and Tax Statement (Form W-2, State copy) for each employee, including those for which no taxes were withheld, that the employer employed during the year. These forms must be filed by February 28 of the year following the calendar year in which taxes were withheld from employees.

The employer must continue to file the annual return until he wishes to permanently close the account (i.e. because the employer moves out of state or the employer has permanently ceased to hire household employees). If the employer wishes to close the account, he must provide notification to the Department. After this notification has been received and the Department also receives the final return by the following February 28, the account will be closed.

If an employer fails to file a Household Employer’s Annual or Final Summary of Virginia Income Tax Withheld Return by the due date of February 28, penalties and interest will apply in the same manner as for other withholding tax returns.

If you have additional questions, please visit the Department’s website at http://www.tax.virginia.gov or contact us at (804) 367-8031.