Do I need to give a 1099-misc to the lady who cleans for me?

sogofan

For the first time ever, I began having a lady clean for me for 4 hours every other week. (Such a luxury for me and I love it!) She cleans for other people too, so I look at her as an independent contractor, but since she has made over $600.00, do I need to give her a 1099? I've read advice both ways.

Thanks for any advice you can give!

Jane

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Elmer J Fudd

1099-Misc is only used to report certain payments made by a business . It doesn't apply to personal payments.

Depending on how much you pay your housekeeper, you may be required to pay and withhold Social Security taxes. Remember the various Nannygate incidents some years ago?

It's best that you check with your tax return preparer/tax advisor.

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sogofan

I think you are right Snidely. Thank you for your comments!

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GaryFx

I suggest starting with IRS Pub. 926. The fact that she has other clients and only works for you four hours every other week leans heavily towards her being an independent contractor, in which case you have no reporting or withholding requirements.

Nannies are inherently more likely to be household employees, since they work for just one client, often live in the household, the clients furnish most of the items used (food, cooking equipment, toys, etc.) and the clients have far more control.

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joyfulguy

You're not under the care of a nanny! Or "contracted" to one, either.

She's an independent contractor.

ole joyful

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sogofan

Thanks joyfulguy! I appreciate your comment! :-)

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Elmer J Fudd

I'm a US CPA, joyful is a long retired Canadian.

You can choose who you think has a better background to answer this (frankly) rather simple question.

If your house cleaner is an individual working at your direction, she's not an independent contractor. Neither are most self-employed nannies that work in your home providing childcare and other doing household duties.

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MommaKick

Attorney (US) here....snidely is correct. If you tell her when to clean and how, she's an employee and if you get audited, you better have been paying her like an employee and issuing a W-2 and withholding taxes. Regardless of how much she made - the $600 issue is just a cut off for which Indep contractors get 1099's but she is not an Indep. contractor in any event. Hope this helps.

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dadoes

We treated the woman who looked after my grandmother (usually 5-ish hrs per day Mon-Fri) for seven years as a household employee, withheld federal tax, Social Security, and Medicare, gave her a yearly W-2, and filed Form 1040 Schedule H. Yearly state unemployement report also. We hired her directly, not through an agency. She may have had other clients but what she did in her "off-time" related to us was of no consequence any more than is what I do in my off-time of consequence to my employer.

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GaryFx

I believe both the attorney and CPA are engaging in oversimplification, specifically in regard to the audience here. Not that they're wrong on the surface, but that many readers will interpret the statements incorrectly.

The IRS has a decent review, in mostly lay terms, on their Independent Contractor or Self-Employed page. Be sure to drill down the three links under the Common Law Rules subtitle.

The problem is that "when and where" is much more specific than the casual reader might think. Saying "could you please come on Wednesday instead of Tuesday" isn't telling them when; it's a negotiation. Saying "start the kitchen cleaning at 10 and be done by 10:30, and then do the living room until 11" is telling them when. Saying "I want you to use only organic cleaners" isn't telling them how. Saying "I want to use this particular brand of cleaner" is. Saying "I'll provide the cleaners, but you have to provide your own bucket, sponges, and rubber gloves" is sort of in the middle.

In short, when it comes to the pragmatics, I've never seen a housecleaning arrangement, other than a daily or live-in maid, that meets the standard of control for being an employee. Even if you provide all the cleaning supplies, it's rare that you would be exercising control over the "details and means" of the work. (If you want to see an extreme example that clearly does meet the standard, try this Tax Court case.)

On the other hand, in dadoes example, I don't doubt that reporting as a household employee was correct, but there's a big difference between 5 hrs/day, 5 days/week and an every-other-week cleaning service.

(Aside: I'm an EA, meaning my license comes from the IRS.)

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Elmer J Fudd

Gary, the original poster wasn't asking for internet links but rather advice. I'm now retired, but that was what I spent a career doing. It's a simple question, don't make it into anything more than that.

As for information sources, I trust you know that these determinations rely heavily on common law concepts from labor law. (Do you know what "common law" means?)

I looked at what you linked a "Tax Court case". I don't consider it relelvent, but even more than that, it isn't a Tax Court regular decision, it wasn't decided by a sitting Tax Court judge, and (many believe) is of a type that the reading of which is not time well spent. You do know about the Small Case track? They're almost like administrative decisions, really of no value.

I'm glad you're an EA, I hope you work hard to do the best possible job. Don't insinuate that your designation as an EA is in any way comparable to or competitive with the designation of CPA. Because it's not and the differences are substantial. You and I both know that, others may not.

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jennbo

Oh my - As a CPA here and feeling a little bad that the EA who did their best to help was treated so disrespectfully. I'd like to be technical and say a CPA license has been misconstrued by the general public to mean "tax expert" because the IRS determined at some point that it was acceptable for a licensed CPA to sign returns as a paid preparer (EAs can do this too). There are many CPAs and tax attorneys who are excellent at tax advice, but there is a large percentage of the CPA population who are far more suited to determining the best way to account for something under GAAP (or other e.g., IFRS) standards - which was the intent of CPA licensing so there would be someone to attest the financial statements of public companies (aka auditors of a company's books and records). Becoming a CPA requires some knowledge of tax (it's on the exam) and the accounting standards include some rules on how companies account for tax expense. Regardless, the tax code and supporting items (regulations & cases) are ever evolving and broad and depending on the issue enormously complex or not clearly defined under the statute and other items. So, like a medical doctor, at some points you actually need a specialist for a particular tax issue. I happen to be a CPA who has specialized in a particular area of tax and it isn't individual taxation - so I'm generally useless to my friends & family. I can point you in the correct direction!

Hoping off my soap box... I can't believe I ranted. but at this time of night... what can you expect. Also - I'm 5 months late to provide relevant information for this particular GW user.

Giving credit - Snidely was spot on to point this GW user to the household employee publication (generally updated annually by the IRS). PDF Link to Publication 926 (though I recommend an internet search to ensure you get the most current version)

So if you've come across my rant but actually have a similar question... evaluate the publication on household employees. As soon as you put "care of others at your home" and you've got an employee. Housekeepers - depends on your facts. If you happen to think you've got a household employee - I think the IRS has made the reporting process relatively easy - as long as it is just one household employee. I find the state compliance to be more painful - but this will depend on your state.

For other links to consider.

- this article Houston Chronicle attempts to distinguish between the type of situations a housekeeper may have.

- this article from care.com is consistent with the Houston Chronicle

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bry911

I too am a CPA (I just really wanted to put that in there), and have a PhD in accounting, but if I am doing your taxes you are in for a world of hurt. I wouldn't even dare to do my own taxes. I know the simple stuff, but I am out of my depth beyond, "no, Fluffy kitty is not a dependent."

However, having had a live in nanny/housekeeper, I can say absolutely the time to consider the nature of the relationship is when you hire a housekeeper and not at the end of the year. A little information in the beginning can actually save a lot of money in the end.

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summersrhythm_z6a

Really? So if my neighbors hired kids to cut the grass for all summer, the kids had to pay taxes for it? That's just not real......is there an age limit?

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bry911

Kids, who can be claimed as a dependent by someone, do not have to file a return until they make more than $6,200 of earned income, or $1,000 of unearned income. There is a worksheet if they have both. Mowing a yard would be earned income, investment interest is an example of unearned income. So typically no they will not have to pay taxes unless they are really good at mowing yards.

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summersrhythm_z6a

Thanks for the info.

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jlhug

Another EA here. I do not believe that there is a minimum age that someone has to be before they owe self employment taxes. So the child who makes more than $400 mowing lawns as an independent contractor should be filing a tax return if only to pay self employment taxes. If someone can find something in tax code that says I'm wrong, please let me know.

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bry911

Yard workers, especially as would be "kids to cut the grass", are typically household employees and not independent contractors. You can check out IRS publication 926 for more info.

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jlhug

Bry, I think someone cutting grass would be more likely to be an independent contractor especially if they use their own lawn mower than someone who cleans your house. For the lawn, you might have them cut your grass once a week without designating a particular time or day. For the house, you typically set a time and day. Most of us want and have more control over someone entering our house than someone doing yard work. It all depends on the facts and circumstances.


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jennbo

Bry, this would be the first kid in America to get a 1099 for mowing lawns. This kid runs a business and should he be subject to tax, that depends on all his facts and circumstances and the homeowner would not (generally) be responsible. Now, if I have a dedicated gardener there's a possibility I have an employee, but again depends on facts and circumstances.

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Elmer J Fudd

Please read the thread. My first comment (at the top) answers your question. Form 1099-Misc forms are only required to be filed for payments made by businesses. There's no reporting requirement for such payments made for personal expenses.



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summersrhythm_z6a

Teens can be good gardeners/helpers. I had a teen to water my potted flowers while I was on vacation for a week, he didn't want cash, he wanted 15 bags of candy! He did a good job, got more than 15 bags. :-) His mom wasn't too happy about it......

We have a lot of snow storms here in the winter(snow country), I often see teens helping seniors to shovel their driveways, it's a good thing for them to do. They shouldn't pay any taxes if they don't own a company.

......and for $600, I wouldn't give the cleaning lady a 1099, give her a break, it's not easy to work for living.

So it's a happy ending, no one is paying taxes for house cleaning and grass cutting! :-)

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Elmer J Fudd

Just to be sure you've understood - the payments a kid gets are income whether the payor needs to report the money paid or not. Yes, people give younger kids a pass, but whether the worker owns what you're calling "a company" has nothing to do it.

1099 is for payments made BY businesses, Not TO businesses.

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bry911

A kid cutting your grass is not an independent contractor simply because he uses his own lawn mower. First, find a court case where the courts have ruled that a kid cutting grass is an independent contractor. When you can't, realize that either they are not, or revenue agencies don't give a crap. Second, the rules are not quite so cut and dry as he provides a lawn mower and is therefore an idependent contractor. You will still have enough control over when and how he works for him to not be considered an independent contractor. The courts have ruled that pizza delivery drivers who use their own vehicles are not independent contractors.

Edit: Just to be clear, I never said a thing about a kid mowing the yard getting a 1099...

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summersrhythm_z6a

Thanks Snidely, pretty happy for the kids, I know 1 kid's parents. A good family. I didn't take the tax class, try to understand this 1099 misc income. If one lady works 2 jobs, 1 full time (teacher)and 1 part time-Macy's holiday helper on the weekends, making $800 during the holiday season, then Macy's has to give her a 1099, is this right? I'd think Macy's should give her a W2.

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Elmer J Fudd

1099 is for payments by a business as compensation for services by a non-employee.


W-2 is for wages (and withholdings) for employee payments. I'll assume the Macy's job example is viewed as a temporary or a part time employee. But it's employment all the same. The difference to the business of whether someone is treated as employee or not is whether they have to pay employer's share of the various employment taxes and consider coverage for benefits.


This isn't for an employer to decide on whim, there are rules (though like most things, the rules aren't so clear as to give a crisp answer for each fact pattern). Depending on the business and location, enforcement and audit of these situations is spotty. Though, mostly done by the states.

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summersrhythm_z6a

Snidely, Thank you very much for the clarification. Now I have a better understanding on 1099.

You'd be an excellent professor! :-)

I didn't see bry's last post for some reason, may be because we were posting at the same time last night. I guess you didn't pass out after 5 miles run. Thanks for your input too. :-)

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bry911

Snidely you should be a professor. Want a job?

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Elmer J Fudd

Ah shucks, that's a kind comment for just a short reply.


Over the years I did a lot of seminar presentations, internal training (in my firm), ojt for younger staff, and twice taught graduate courses as an adjunct lecturer.


I like it best when the audience had basic knowledge or some idea what I was talking about. The semester long experiences with rookies wasn't enjoyable.

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summersrhythm_z6a

I knew it! The truth is out now. :-) I was on the accounting path many moons ago, then jumped to something else. I'm sure your classes were enjoyable and fun. Charge Bry big $$$! He might have a big budget plan for next year. :-)

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bry911

I understand the desire to teach experienced students for sure. I actually prefer the new students, there is a moment, that you can sometimes be a part of, where things just click into place and students go from struggling to learn anything to a desire to know everything.

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Elmer J Fudd

Yes, I understand that. Something similar happens when presenting an advanced topic or an update on an advanced topic to experienced people.


Maybe it's the opposite. It's the look you see on a face when someone realizes something they thought they understood, in fact they had pieces wrong or confused. Or something they thought they understood, they in fact didn't understand at all- that comes out more in questions.

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nguyen74

I'm not a CPA, account, or EA here but I believe Elmer J Fudd is correct. The 1099 requirement is typically for businesses. Let's use a little common sense here...

EA, CPA, accountants, etc... Do you have all your clients who you have billed over $600 in a given year to file 1099 by January 31st and have them send you a copy of the 1099? I think not!

Do you file and send 1099s to your lawn person, your plumbers, electricians, mechanics, roofers, contractors, AC guy, attorney, etc? I think not!

this is for individuals, organizations, and business who is making payments to non-employees and independent contractors in the course of doing business not personal payments.

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