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Palo Verde
05-09-2002, 06:37 PM
I've just started having a woman come into my house to clean every other week for a few hours.

Am I supposed to pay some sort of tax or social security on her?

Nametag
05-09-2002, 06:40 PM
No. You are required to pay taxes on employees; if she only comes in every other week, she must be doing other houses, and is therefore a contractor, and is thus exempt.

OTOH, I am neither a lawyer, an accountant, a tax professional, a judge, a contractor, nor an employer, so...

Ringo
05-09-2002, 06:42 PM
It depends. Do you pay her as your employee? If so, yes. But if you pay a service company for whom she works, probably not. If the entity to whom you write a check is any form of corporation you don't need to worry about it.

Ringo
05-09-2002, 06:55 PM
From Independent Contractor or Employee? (http://taxpros-plus.com/articles/independent_contractor.htm):

What about a household worker that comes into my home on a regular basis? Do I have to treat them as an employee or contractor?
If you have someone who comes into your home on a regular basis, say weekly from somewhere like Merry Maids or a similar service, you would not have to worry about anything because they control how the work is done. Service agencies such as Merry Maids, usually have set standards and policies that their workers must follow on how to do the tasks they are assigned. However, if you hire an individual on your own to come in and clean or provide other services, you do need to make an employee versus independent contractor determination.

Employee status is determined without regard for whether the work is full or part time, what work is done, how the worker is paid, or whether the worker was obtained through an agency. If the worker controls how the work gets done, and when it gets done, then he/she is an independent contractor. If, however, the homeowner controls these, then the individual is an employee.

My friend has household employees that he does not have to pay any employment taxes for. How can this be, given the rules? How do I go about paying the employment taxes for my household employees?
The rules for household workers are somewhat different. If you determine that the worker is an employee, then you as an employer must withhold and pay FICA tax on wages of $1,300 or more per year per employee. No FICA taxes are withheld if wages paid in the calendar year are less than $1,300. FICA tax must be withheld and paid on all of the employee’s wages if the wages are $1,300 or more in the calendar year (including the first $1,300 of wages paid). For example, an employer paid a maid $800 and a babysitter $600 during 2001. No FICA taxes are due because each employee received less than $1,300 during the year. If the household employee is under the age of 18 at any time during the year, no FICA taxes are due for that individual if the job is not their principal occupation. If a minor is a full-time student, they are deemed to have an occupation.

Household employers also must pay FUTA tax on FUTA wages paid of $1,000 or more per quarter (in the current or preceding year) per employer. FUTA wages are the first $7,000 of wages paid to each household employee in the calendar year. Example: Assume the combined wages of $1,400 in the above example were paid in a single quarter. The employer is liable for FUTA tax. You then owe FUTA on all wages for the entire calendar year and on all of the next year’s wages as well whether or not they go over the $1,000 floor. Unemployment taxes are imposed by most states as well, although each state’s rules vary from each other and from the federal rules. You may owe unemployment in your state for any household employees but not federal unemployment. If you do not pay state unemployment taxes that are due in a timely manner, federal unemployment taxes (FUTA) are raised. Household employers must file Schedule H with their 1040 to pay FICA, FUTA and any withheld federal income taxes. Household employment taxes are paid in through an employer’s estimated tax payments during the year.

Independent Contractor V. Employee Is There Really A Choice? (http://lectlaw.com/files/emp25.htm)

Palo Verde
05-09-2002, 07:28 PM
She doesn't work for any company. I guess I control when she comes (we've agreed on Thursday mornings). So what am I supposed to pay, and to whom? Should I ask her? I'm not even sure of her immigration status.

gazpacho
05-09-2002, 07:55 PM
Originally posted by autz
She doesn't work for any company. I guess I control when she comes (we've agreed on Thursday mornings). So what am I supposed to pay, and to whom? Should I ask her? I'm not even sure of her immigration status.
My advice autz is not to go into politics. What you are doing has brought down many a presidential appointee.

I have never heard of anybody that pays the social security of the people they hire to come over once a week to do yard work or house work. That does not say much about the legality though I don't know any body who obeys the speed limits very well either.

gazpacho
05-09-2002, 11:03 PM
I talked to my wife about this a little more. The Maid we currently have used to work for an agency but now she arranges her own work. My wife had a look at the contract between the maid and the agency. The contract stipulated that she was an independent contractor and the agency did not pay social security taxes.

I guess my rambling point here is that going through an agency so they you are not responsible for paying these various taxes does not mean they are being paid.

Scarlett67
05-10-2002, 10:34 AM
Independent contractor checking in.

There is more to the issue than whether she works for an agency or who decided what day she comes in. I have deadlines every week, by which time certain parts of projects must be completed, but I am still an IC by IRS rules. The IRS has a list of 20 questions that it uses to determine IC status. There's no rigid rule as to number of rules that apply; each case is considered individually, but generally, the more rules you can satisfy as to IC status, the better. Here's one source:

About.com: IRS 20 Questions (http://sbinformation.about.com/library/weekly/aa032997.htm?once=true&)

This page contains a link to the relevant IRS publication.

Moirai
05-10-2002, 11:17 AM
autz, if you do decide to "do it" legally, a software program like QuickBooks will do the calculations for you when you pay her.

We have a nanny who we pay as an employee of my MIL. We decided to do it legally because my MIL could never survive an audit.

By the way, IIRC you as an employer (any employer) may not be obligated to determine a person's legal status in some circumstances. You are supposed to ask for a Social Security number. That's it. I'm not even sure that you can REQUIRE them to show you a card. Also, you as an employer are not considered an expert in federal IDs and cannot make the decision of whether or not the card is fake!

In my experience, a housekeeper cannnot be classified as an independent contractor, unless she sets her own hours, job duties, etc. The IRS will not fall for it if you tell them that she does!

CookingWithGas
05-10-2002, 11:39 AM
Originally posted by EJsGirl
By the way, IIRC you as an employer (any employer) may not be obligated to determine a person's legal status in some circumstances. You are supposed to ask for a Social Security number. That's it. I'm not even sure that you can REQUIRE them to show you a card. Also, you as an employer are not considered an expert in federal IDs and cannot make the decision of whether or not the card is fake!

IIRC prior to employment you can ask if the person is legally authorized to work in the US, although not about citizenship or the nature of the authorization. At employment time you can require proof of authorization (citizenship, green card, visa, etc.) (having a Social Security number per se does not constitute authorization to work in the US) although it is correct that you are not expected to presume fraud and verify the authenticity of any documentation.

Strictly speaking it sounds like the law requires you to pay the taxes (SS, maybe also unemployment, Medicare, etc.), but that would also mean she gets a smaller paycheck. She probably wouldn't want that even though paying the SS would qualify her for benefits later.

Nametag
05-10-2002, 11:48 AM
Don't listen to these people. A NANNY is a full-time employee, who works for you and no one else. Those political appointees got in trouble for not paying SS taxes for LIVE-IN help.

A cleaning lady who comes in once a week, who tells YOU when she can come in, and cleans several homes in a day, and dozens in a week, is NOT YOUR EMPLOYEE.

You are NOT responsible for her taxes, her immigration status, or anything else.

gazpacho
05-10-2002, 12:43 PM
Nametag,

Your post is a compellingly sane view of the situation. Nannies rarely work for more than one client at a time. However, tax law is usually written with goals that don't seem to have a lot to do with getting revenue for the government. Do you have some cites to back up the idea that we don't have to pay taxes for help that comes in once a week?

I read the 20 questions posted by Scarltt67 and I am somewhat appalled by how subjective the rules are.

Number 11 does not make any sense to me at all.

11. Reports. An employee may be required to submit work progress reports. An independent contractor need not.

In my experience the contractor provides much more in the way a status reports than the employee does.

Nametag
05-10-2002, 01:20 PM
http://irs.gov/pub/irs-pdf/p15a.pdf

Unfortunately, the IRS publications are skewed toward identifying people as household employees, rather than eliminating them as such.

The twenty questions are not bad; I don't think they ALL have to be true for every contractor; these ones seem very germane to this case:

14. Tools. An employee is usually supplied by the employer with the tools, materials and equipment needed to work. An independent contractor provides his or her own.

15. Investment. An employee has little or no investment in the business. An independent contractor has a significant investment in his or her own business.

16. Profit and Loss. An employee does not have a profit or loss. An independent contractor can make or lose money on a job.

17. Exclusive Work. An employee generally provides work to one firm. An independent contractor is generally free to provide services to more than one unrelated firm at a time.

18. Availability to General Public. An employee does not offer services to the general public. An independent contractor does.

CookingWithGas
05-10-2002, 02:58 PM
Originally posted by Nametag
Don't listen to these people. A NANNY is a full-time employee, who works for you and no one else. . . .

A cleaning lady who comes in once a week, who tells YOU when she can come in, and cleans several homes in a day, and dozens in a week, is NOT YOUR EMPLOYEE.

You are NOT responsible for her taxes, her immigration status, or anything else.

Don't listen to this person. Listen to the IRS (http://irs.gov/file/display/0,,i1%3D52%26genericId%3D16278,00.html). There's nothing that says a household employee (requiring you to pay taxes) has to be full-time or exclusively employed by you. To wit:

Household employees include housekeepers, maids, babysitters, gardeners, and others who work in or around your private residence as your employees. Repairmen, plumbers, contractors, and other business people who work for you as independent contractors, are not your employees. Household workers are your employees if you control not only the work they do, but how they do it.

If you pay a household employee cash wages of $1,300 or more in the year 2002, you generally must withhold social security and Medicare taxes from all cash wages you pay to that employee.

CookingWithGas
05-10-2002, 03:03 PM
BTW the link I just posted (http://irs.gov/file/display/0,,i1%3D52%26genericId%3D16278,00.html) has itself a link to a publication specific to household employees (http://irs.gov/pub/irs-pdf/p926.pdf), which deals with the contractor/employee issue specific to household employees.

gazpacho
05-10-2002, 03:47 PM
The link from Cooking with gas is still pretty confusing. The two examples given are not much help to me in deciding this. 1 is a person who comes in 4 days a week to baby sit and do light cleaning. 2 is a guy with a lawn care business that sends some one over. They seem to make a big deal about who tells who what to do and if they offer their services to the general public. Our maid certainly offers her services to other people as does in fact do some amount of advertising to get more buisness.

We recently had our my kitchen redone. We told the guys that came in to do the work exactly what to do. We want the stove over there the fridge there. We did not tell them how to use a hammer. Does this mean they were our employees? We tell the maid what should be cleaned but not how to clean. I would say we give the maid less specific instructions than we give the company who remodeled out kitchen.

CookingWithGas
05-10-2002, 05:04 PM
Originally posted by gazpacho
Our maid certainly offers her services to other people as does in fact do some amount of advertising to get more buisness.

We recently had our my kitchen redone. We told the guys that came in to do the work exactly what to do. We want the stove over there the fridge there. We did not tell them how to use a hammer. Does this mean they were our employees? We tell the maid what should be cleaned but not how to clean. I would say we give the maid less specific instructions than we give the company who remodeled out kitchen.

If your maid actually advertises then IMHO based on IRS pubs she is clearly a contractor--that is indisputably offering services to the general public. (Someone you hired because her sister is a friend of your barber is not necessarily offering services to the gneral pulbic, even if she works for more than one household).

If you didn't pay the kitchen guys individually, and told them where you wanted things but not how to move them, then they're contractors. Again, IMHO.

gazpacho
05-10-2002, 06:06 PM
If you didn't pay the kitchen guys individually, and told them where you wanted things but not how to move them, then they're contractors. Again, IMHO.

The kitchen guys were clearly contractors as we hired a company the sent a crew out. It was more to find out what the meaning of the idea that the amount of instruction you give people in some way determines their contractor / employee status. From the IRS publication. "Betty follows your specific instructions about household and child care duties." Every body who comes to my house to do something for me is in some way following my specific instructions. In the case of the maid I think the instructions are much less specific than those given the contractors.

In fact this mirrors what I see in the work place. I as an employee of the company I work for am given much less specific instructions about my job and its duties that the contractors the company hires. So not only is this criteria vague it is also seems incorrect.

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