Paying taxes for house cleaner

We have a new house cleaner who has asked us to claim her and pay our share of her taxes, which we are definitely willing to do. However, I don’t know how to do this. My husband does our taxes using turbo tax so we don’t have an accountant we can ask. The house cleaner says it’s something that is done at the end of each year, but I am wondering about taxes other than social security (like disability). I want to be covered in case she falls down my stairs or something like that. She comes twice per month and we pay her more per year than the $2k limit (apparently after $2k one has to pay employer taxes). We are in California. Any advice is welcome!

No, you need to takeout the FICA with each pay check and make regular deposits of those taxes. And if she is an employee then you will also need Worker’s comp - http://www.dir.ca.gov/dwc/Employer.htm– and you will also need to take out state payroll taxes – http://www.edd.ca.gov/Payroll_Taxes/What_Are_State_Payroll_Taxes.htm

I’d recommend that you get professional advice. You can hire a payroll service to do all of this – I found this one online recommended as a good choice for household employees - https://www.businessnewsdaily.com/7492-best-payroll-service-household-employer.html – they charge about $50/month for their service.

And here’s another one that would cost a little less - about $40/month – https://www.businessnewsdaily.com/7479-best-payroll-service-micro-business.html

I don’t have any direct experience with either of them as I do not currently have any employees and have not managed payroll for anyone since my kids were small…

But if I were in your shoes, employing a housekeeper who was only coming twice a month - I wouldn’t do it. It’s just too much of a hassle.

Your housekeeper is right – if you are paying her more than $2000 a year, then you do need to pay empoyment taxes - https://www.irs.gov/pub/irs-pdf/p926.pdf

But you would’t have to pay those taxes if you worked with a maid service.Then you would pay money to the agency and they would be responsible for paying their employees and paying all taxes.

If you were hiring a full time housekeeper or nanny who was in your house every day, or even several days a week, it would be different-- but I just don’t think it’s worth all of the paperwork for someone who only comes twice a month.

Look at Form 1040 Schedule H.

Since the house cleaner mentioned it happening at the end of the year, I wonder if she actually means the 1099 IRS form provided to contractors?

Does she work for others as well? If so, I would just 1099 her. She’ll file her own taxes and pay self employment tax. Up her pay to account for the taxes.

Agree— 1099 her. She is a part time employee and makes her work schedule. She is not your FTE.If she falls, your homeowners should cover it. Alternatively, you could theoretically ask her to have her own liability insurance (insured/bonded).

https://www.irs.gov/instructions/i1040sh

See the Instructions for Schedule H if you pay a household employee $2000 or more in a calendar year.

You report the FICA/Medicare (7.65% employer and 7.65% employee portions) and any federal income taxes withheld on your housecleaner’s wages once per year when you file your own Form 1040 tax return with Schedule H. Separately you need to issue a W-2 and be aware of any state filing requirements and look at FUTA and SUTA.

@Emsmom1 Just to be clear, ppl are replying about 2 different ways to handle this situation. You would either withhold taxes, SS, etc., & issue a W-2 or do none of that and issue a 1099 at the end of the year.

The decision rests on the specifics of the employment or contractual agreement, it’s not just a choice. I would go to irs.gov and search household employees or speak with a tax person.

From the little you’ve said here, and especially if this person cleans other houses, it sounds like a 1099 situation.

If she works for others and has control over many aspects of her job, she can be an independent contractor. I have been an independent contractor and hired independent contractors. I have also been an employee and hired employees. From my paperwork viewpoint, it’s easier to have independent contractors (instead of employees), as well as you are very clear that they meet the criteria.

I agree that it can be easier if you use a service who does charge a fee or % for doing the paperwork go you if you don’t know how to do it yourself. The bookkeeper I have who specializes in nonprofits helps me make sure I have all the proper paperwork filed on a timely basis—worker’s compensation, temporary disability insurance, Medicare & social security withholding, etc.

Merry Maids and other agencies charge as contractors and do the paperwork and I believe provide bonded employees. As stated above, that is a good option to avoid extra paperwork and expense.

I definitely think you can 1099 her. She is an independent contractor, especially if she cleans for other people. That is much easier to do tax wise and still ethical. If you did decide you wanted to treat her as an employee I would definitely hire a payroll company - doing your own withholding etc is very tricky and you don’t want to mess with that.

When I did payroll for a small non-profit where everyone was technically in contractor status, one specifically complained to me about her tax situation. She wanted to be payrolled because she had the notion that she would end up with more money that way. She was used to spending her whole paycheck, and then receiving a refund for tax overpayment each year, and didn’t want to accept that she needed to set aside about 30% of her self-employment income for taxes.

Perhaps this is part of the cleaner’s situation. If so, perhaps you can help her develop the strategies she needs that will allow her to meet her tax obligations on her own.

Whether employee (ee) or independent contractor (IC), I think is related to degree of control/oversight OP has. The more control OP has, the more it sounds like an ee, the less control, the more it sounds like IC. For example a person who rents space at salon, cuts hair, orders her own supplies, schedules her own appts, sound like IC. Here it sounds like house cleaner is an ee as she comes twice a month I’m assuming on days/times specified by OP, OP provides cleaning materials, tells house cleaner what OP wants done, etc. I’m not so sure you can treat house cleaner as IC and 1099 her. I think payroll system needs to be set up. I like idea of Merry Maids.

I am an IC housekeeper and have been 1099’d by clients for years and have never had a problem.

You may need to agree to pay her 8.28% more if you are going to give her a 1099-MISC and not a W-2 to make up for employer’s 6.2% FICA and 1.45% Medicare.

1/1.0765

Yes, I agree with CottonTales. A housekeeper who works for several people is an IC. A full-time housekeeper or nanny would be an employee.

I, on the other hand, was counted as an independent contractor for a company when I really should have been an employee. I worked in their office three long days every week. I used their computers and had no other clients. I kind of wondered about it, but I knew I wouldn’t be affected if the IRS ruled I was an employee since I paid all my taxes.

Well, sure enough, the IRS started investigating. The company’s bookkeeper told me the IRS would be calling me. She wanted me to say that my hours were irregular, that I worked from home, etc. I said, “NO!” Thank goodness, I never got a call. Somehow, the bookkeeper manged to convince the IRS agent that I was an IC.

Here is the form that explains the criteria for a 1099 vs w-2 employee. http://galachoruses.org/sites/default/files/IRS-20-questions-W2-vs-1099.pdf If your cleaning lady works for other families as well, and is in control of her schedule, among other things, you don’t pay half her taxes! Sounds like maybe she got audited. Many self employed people do, especially if their expenses are hard to justify against their reported income.

I saw a recent job posting on another professional listserv for a 40 hr a week job at a hospital, that was a 1099 contractor position! Say whaa???

^Wow, that’s bad.

If she said you take care of it “at the end of the year” it’s either a 1099 form reporting amount paid to IRS and she is responsible for including the income on her tax return and paying all taxes owed

Or the seldom used Schedule H on your tax return

You may need to ask her which one she wants. 1099 lets her set up a sole proprietorship for deducting her business expenses

Wow, I just looked at Schedule H. That is a complicated mess for a regular taxpayer. It requires you to know your the California Unemployment rate for the type of business, etc. that’s really hard if you are not using a paid payroll service. For example I own a business with employees in Ca and I get an annual gobble goop form telling me my newly calculated Unemployment Insurance rates, State Disability rates, etc. I don’t understand one word of it but I just plug the rates into Intuit Payroll and some kind of magic happens.

Stay away from Schedule H on your tax return if you can. Turbo Tax can generate a 1099 for the housecleaner. You need to do it inside Turbo Tax if you can because the IRS wants them sent in electronically. I’ve never tried to generate one in the regular Turbo Tax software, only in the Business software.