Tax obligation for housekeeper?
January 18, 2014 8:48 AM   Subscribe

I have an occasional housekeeper who used to work for me very intermittently, and now it's becoming more of a regular thing. I estimate that in 2014 I will end up paying her approx. $2500. She is eager for me to report this income officially and do whatever my legal obligations are re: social security or whatever. I'm totally willing to do it - but have no idea how.

The gist is very simple: she's a citizen; when she comes to clean I give her $100 cash; we now have an every-other-week scenario in place so I'll be paying her more than I have in the past.

So what are my obligations, legally? And what is an easy way to accomplish it? I usually do my taxes with a professional, if that makes a difference.
posted by BlahLaLa to Work & Money (24 answers total) 3 users marked this as a favorite
Just realize I should have said, in case it's not obvious: this is in the U.S.
posted by BlahLaLa at 8:49 AM on January 18, 2014

Not an accountant, but she's not really an employee. She's someone you contract to perform a service.

Similar to how you would hire a plumber, it's her responsibility to invoice you for work performed and declare it herself. You shouldn't have to account for anything here.
posted by rutabega at 8:59 AM on January 18, 2014 [2 favorites]

She seems to be functioning as an independent contractor. I don't think you would be obligated beyond filling out Form 1099-MISC, per the wiki article. I am in no way qualified to answer this question beyond linking to possibly related Wikipedia articles.
posted by Green With You at 9:00 AM on January 18, 2014

Green With You is correct, and rutabaga is not. A 1099-misc is called for here. You have no tax obligation, but do need to file it.
posted by mkultra at 9:14 AM on January 18, 2014

This looks like a good place to start getting information. It talks about what forms to file for a household employee whom you pay more than $1900 in a year.
posted by songs about trains at 9:16 AM on January 18, 2014

I would go with songs about trains answer over mine.
posted by Green With You at 9:28 AM on January 18, 2014 [1 favorite]

If she wants everything to be above the table then you should start paying her by check so you have a record.
posted by mareli at 9:28 AM on January 18, 2014

Determining whether she's an employee or an independent contractor: here's the IRS on this topic, and here is their longer explanation in pdf.

So basically it comes down to Behavioral Control, Financial Control, and Relationship of the Parties. Do you have the right to give your plumber specific directions on how to do their job, or what tools they must use? No-- you define WHAT needs to be done, but now HOW it must be done. Do you have the right to tell your housekeeper to clean your new countertops with a special environmentally friendly cleaner that you supplied? Of course you do. Therefore, you have Behavioral Control over your housekeeper, so she may be considered an employee.
posted by acidic at 9:46 AM on January 18, 2014

Yes, I agree that she's my employee. And based on Songs About Trains' link, it's clear that I do have the obligation to make those payments, which I'm happy to do. Anybody have thoughts on the EASIEST possible way to do this? Is it too much to hope there's some amazing app that'll do it for me?!?
posted by BlahLaLa at 9:48 AM on January 18, 2014

Try searching for nanny payroll/tax services, such as the following:
posted by acidic at 9:56 AM on January 18, 2014 [1 favorite]

We use Breedlove. It's really easy.
posted by purpleclover at 10:14 AM on January 18, 2014 [1 favorite]

I actually doubt that she's an employee rather than a contractor, especially if she's also cleaning for other people and she's only working for you a few hours per week. The IRS is actually very helpful on the phone-- you could probably ask them.
posted by The Elusive Architeuthis at 10:25 AM on January 18, 2014 [1 favorite]

Acidic gave you very good advice. There is a fair amount of paperwork required for household employees -- quarterly federal tax withholding, quarterly state tax withholding, state unemployment insurance, state disability or workmans compensation insurance, W-2 forms.

You can do all of this yourself, it isn't really all that hard, but at least for the first year you are probably better off using a payroll service so that you can get an example of how to do it properly.
posted by JackFlash at 10:33 AM on January 18, 2014 [1 favorite]

You may be getting a lot of very bad advice here. It may be illegal to treat this person as a contractor rather than as an employee. You may be required to withhold taxes. Some of this may depend on what state you live in.

In Massachusetts if you had a baby sitter who worked that much you would be required by law to treat them as an employee rather than a contractor. I believe the same is true of other domestic workers.

Please don't follow the advice of people telling you to just issue a 1099 unless they can site reliable authority that that is legal in your jurisdiction. Giving someone a 1099 rather than treating them as an employee amounts to foisting off the responsibility for employer-side taxes onto the person. For this reason it is disallowed in many places. There are also special rules for domestic workers.

Here is the Nolo page on the subject.

Here is an IRS publication on Household Employees.

There are many online services that will help you deal with taxes for domestic employees. You could also hire a local accountant who is set up for it.

By the way, good for you for doing the right thing and paying this person above the table!
posted by alms at 10:39 AM on January 18, 2014 [1 favorite]

This is basically a giant "needs more information". But housecleaners tend to be categorically very different from babysitters and nannies, and so that's a big chunk of why they tend to be treated differently. The housekeeper who comes over every day and follows a giant list of tasks that you want done daily, and does them exactly the way you like them? Employee. The cleaner who comes every other week with a bunch of supplies and you just tell her that you want the floors done and the kitchen and bathroom and a couple hours later it's all completed? Contractor.

Because they're working with people's kids, childcare workers who work in the home are usually being supervised and directed much more closely, and that's why they're almost always employees. The guy who comes and mows your lawn periodically with his own mower is likely to be a contractor; the guy who comes every couple days to tend to your garden using things you provide according to your instructions, employee.

The fact that they work in your home does not necessarily make them a household employee, and what little you've given us makes me lean, as someone who's done payroll for years and consulted tons of times on how to classify part-time and occasional workers, towards contractor. It's hard to know for sure without being there, but people who are going based on how you do this for childcare are not necessarily giving you good advice about how to treat someone providing qualitatively different services in a qualitatively different manner.

Household workers do not generally get 1099s, 1099s are for payments made in the course of a trade or business. Service providers who provide services directly to consumers are expected to report their earnings to the IRS directly with their tax returns, that's all.
posted by Sequence at 10:52 AM on January 18, 2014 [2 favorites]

How is this situation any different than if you had Merry Maids come over once every 2 weeks?
posted by Mary Ellen Carter at 11:47 AM on January 18, 2014

Merry Maids is a corporation. Employee an individual is a different thing.
posted by alms at 11:50 AM on January 18, 2014

How is this situation any different than if you had Merry Maids come over once every 2 weeks?

Merry Maids is a corporation and the workers are employees of Merry Maids. They pay wages to the workers and handle the taxes for their employees. You hire a service from the corporation. You don't hire the workers.
posted by JackFlash at 11:53 AM on January 18, 2014 [1 favorite]

Re Merry Maids and similar -- the household head might under some fact patterns be a "joint employer."
posted by ClaudiaCenter at 12:07 PM on January 18, 2014

Seek professional advice from an attorney or an accountant. Many good thoughts have been raised here, but advice is what is needed. It may surprise you to learn that it will not cost much.
posted by yclipse at 12:39 PM on January 18, 2014

The very fact that you're hiring an individual to do something that you could hire a corporation to do is, in fact, points in favor of it being a contractor relationship. Lots of individuals run businesses like that, some of them have been my clients. I forgot to add, though, that even if they qualify as a contractor, you can employ them, there's nothing saying you can't.
posted by Sequence at 12:42 PM on January 18, 2014

State laws very for this as well. Most states define household employees as employees and not as contractors. You can do a google search for "household employer" with your state name. Generally, it is annoyingly complicated, with withholding for social security; separate unemployment payments, and perhaps worker's comp insurance.
posted by procrastination at 4:25 PM on January 18, 2014

If you're really concerned about this, then you need to speak to a CPA or attorney in your jurisdiction who is familiar with IRS and local regulations. In general, household workers are classified as employees based on a lower threshold than your typical independent contractor vs employee analysis. However, unless she requests that you do this, I'll say that pretty much no one does. It's really only if you have someone coming in on a daily basis (where you're employing them full time basically) that you run into trouble. Almost everyone I know has a biweekly cleaning lady and it's all cash under the table (still reportable as income by the cleaning lady just not reported to the IRS by you).

You're overthinking this. I say let it go. But if you can't and you really must have an answer then you need to pay someone who can actually answer it.
posted by melissasaurus at 6:02 PM on January 18, 2014

The very fact that you're hiring an individual to do something that you could hire a corporation to do is, in fact, points in favor of it being a contractor relationship.

With all due respect, this just isn't true. At least in Massachusetts it is very often the case that you have two choices:
  1. Hire employees.
  2. Bring in contractors (aka temporary workers) who are employees of another corporation, such as a consulting firm or temp agency.
You cannot simply bring in an individual and treat them a contractor. They have to be an employee of someone. These laws are put in place to ensure that employer-side as well as employee-side taxes are paid properly, and that people are not classified as contractors when they should in fact be classified as employees.

Now, the circumstances of a house cleaner who comes in once a week or once every two weeks may be different, as some have suggested here. But the fact that you can hire a company to do something has nothing to do with how you would go about hiring an individual.
posted by alms at 10:39 AM on January 19, 2014

« Older Malty non-dark non-bitter beer   |   Wood Inlays on a Guitar Newer »
This thread is closed to new comments.