From what I’ve read online, if the cleaner makes her own schedule (she does- she chose the day) and brings her own supplies (she does not and can’t because she takes the bus) then she is considered an IC, otherwise she’s an employee. I really like her but do not want a huge hassle paying my share of her taxes. I guess I will get some professional advice–which hardly seems worth the cost, given she is so part-time but I want to make sure I’m covered in case anything happens. Not sure homeowner’s would cover if she were on the job and got injured.
Do you have an umbrella liability policy? It’s something that I think everyone should purchase. It doesn’t cost that much and it would cover anyone who got hurt in your house. It gives me a lot of peace of mind, knowing I have it.
Worker’s comp claims can be very expensive and last a very long time. This is one reason to be very careful about claiming whether workers are employees or independent contractors. The IRS/labor board can also argue about anything they deem a “misclassification.” My insurance agent and bookkeeper prefer for my liability minimization that we call anyone that works for the nonprofit an employee unless it is very clear they are independent contractors (e.g. the webmaster who has many, m any regular clients and just spends a few hours a year doing stuff on our site). It makes them covered by our liability policy and worker’s comp and temporary disability insurance.
I agree that umbrella policies are very important and should be carried. It covers much of the excess for when folks are injured on your premises.
One time when I was interviewing for a new cleaning person…one of them asked to always be paid in gift cards…and she had a list of which ones she wanted,
Um…no. She did not get hired.
Buys her own supplies … suppose she gave you a list of items which are purchased, delivered and stored at your house. They could be “billed” to your account with the housekeeper, and you pay for them.
It is a “totality of circumstances” sort of thing. There are many reasons an independent contractor providing housekeeping services might be expected to use the household owner’s cleaning supplies-- and I have had housecleaners ask me to buy specific brands of products for their use, but they were still contractors. Some people are sensitive to scents or allergic to certain cleaning products; objects like sponges, rags and mops could end up carrying pathogens from one house to another; vacuum cleaners and brushes would could carry pet hair and parasites lilke fleas or bed bugs from one house to another. All are common household supplies so if I were running a housecleaning service, there might be very good reasons why I might insist that the household owner provide the supplies.
However – the situation also depends on what the worker wants. If someone who comes twice a month as a house cleaner and presumably works for other people on different days also wants to be treated as an independent contractor — IRS is unlikely to question that. But if that person wants to be an employee and their client homeowner is unwilling – that’s a situation far more likely to result in the worker making some sort of complaint to a government agency. One thing to keep in mind is that employees can and often will seek unemployment benefis when their services are no longer wanted or needed.
Working via an agency like Merry Maids completely avoids questions, because the agency is clearly a contractor – but there are also some individuals who run their own housekeeping services. They are contractor’s because they choose to hold themselves out as such – for example, they might list and advertise their services in public directories; they will usually be setting their own fees and policies. An employee might ask for a raise – a contractor would simply announce that her rates were going up.
That difference might also be reflected in the way that the homeowner goes about hiring the worker. I can go on Yelp and find listings for housecleaner’s near me. They have business names like “Sara’s House Cleaning Service” and most have plenty of positive reviews from other clients. If I hire one of them it is very different process than if I post a “help wanted” ad in Craigslist.
Legally, you can’t 1099 her just because it’s more convenient. There’s IRS standards, which she either meets or doesn’t, https://www.irs.gov/newsroom/understanding-employee-vs-contractor-designation. This is a case where you should get professional advice from a CPA or tax attorney.
We always did a 1099. She is not your full time employee. If she were a nanny who only cared for your kids, that would be a different situation.
Don’t over complicate it. If she works for other the other 28 days of the month, or even has a regular job, 1099 her and get on with life. The household employee rule really are only applicable if they are regular type help.
IRS Pub 926 says “A self-employed worker usually provides his or her own tools and offers services to the general public is an independent business”.
Our cleaning woman brings her own vacuum and buys and stores some supplies and mop heads at our house. She also has other clients. She operates as an independent business.
Frankly, I don’t understand why anyone would go through the hassle of hiring a cleaning lady who has to be paid as an employee.
I wouldn’t go through all the trouble for 2 days a month. If I also had a nanny and a dog walker and gardener who needed me to pay the household taxes too, then it might be worth it. For one person, for 2 days a month, to have to hire a service at $50 and get it all squared with an accountant, no.
Put it in writing that you consider her an independent contractor, that you are not paying her an employee, etc. If she won’t agree, hire a service.
Have you bead the cleaning lady fill out a W-9? Be sure to get that completed so that you can complete a 1099. You need that in your file and to them complete a 1099 for her.
You need TurboTax Business to generate a 1099, too. You can’t do it in the regular TurboTax.
But I have to disagree with your statement to stay away from Schedule H. It’s not difficult at all. You do need to include the information about your state unemployment tax. I file an annual Unemployment Tax return for Florida for my housekeeper (very simple) and use the figures from that form to transfer to the Schedule H. TurboTax walks you through the Schedule H so it shouldn’t be complicated.
I have to issue one or two 1099’s each year and I don’t bother with a software program. I just use an online service that charges me about $3 per 1099, and they do the e-filing. This is the service I use – https://www.tax1099.com/ – but I’d assume there are others to choose from. More cost-effective than paying for a more expensive tax program. Filling out a 1099 is simple because no calculation involved-- it’s just a matter of entering the total amount paid in the right box.
Do you need to do the 1099 at the end of the year if you are paying the house cleaner less than 2000$ for the year?
$600 and above triggers the need for 1099.
Unless there’s some trade or business paying the cleaner, no 1099 is necessary or appropriate.
BunsenBurner is correct – anything over $600 requires a 1099. For a W-2, it’s only if they earn over $2000. I made the mistake once of sending a W-2 for one of my mother’s caregivers who made less than $2000 along with the W-2’s of her 2 other caregivers who made more. I figured I should report it although I wasn’t required to.
Nope. Got a nastygram from Social Security a couple of months later and had to issue a corrected W-3 and an amended tax return for Mom. Oops.
Be careful of calling her an employee for other reasons as well. An employee could bring a case against you for things like wrongful termination and would also be subject to workers compensation benefits.
We used schedule H because we had a nanny for a number of years. It was really no trouble to do; and that was back in the days before I converted to TurboTax, so I was doing the returns by hand. We paid Social Security, Medicare, and federal unemployment taxes, as well as state taxes (mostly unemployment, I think). But the nanny was essentially working full time with us, unlike your house cleaner. However, the threshold for the various taxes is set pretty low (based on the total paid in any quarter, I think, and the amount that triggers tax is not that high).