The Business Side of Hiring a House Cleaner
It's not unusual for family child care providers to hire someone to clean their home. You work long hours and any extra help is always welcome.
What are the tax consequences of hiring a house cleaner?
A house cleaner is an independent contractor, not an employee. This is because the person does not operate under your direction or control. You tell the person which rooms to clean but you don't give directions on exactly how to clean the room. Therefore, you don't have to withhold Social Security/Medicare taxes, or pay state and federal unemployment taxes.
If the person is self employed, a single member LLC or a partnership and you pay them $600 or more in a year you must issue IRS Form 1099-MISC. One copy should be given to the house cleaner and another copy is mailed to the IRS. This form is intended to ensure that they are reporting this as income and paying taxes.
If the person works for a company with multiple workers (“Merry Maid, Molly Maid, Maid Brigade, etc.) you may or may not have to issue Form 1099-MISC. In this case you would request the company send you a Form W-9 which would indicate whether or not you must issue Form 1099-MISC. If the Form W-9 indicates that the person is an S or C corporation, you don't have to issue Form 1099-MISC. If the W-9 indicates that the person is sole proprietor, single member LLC or partnership, then you would have to issue Form 1099-MISC to the company.
You can deduct the cost of the house cleaner based on what areas of the home she is cleaning. If she only cleans rooms that are used 100% for your business, you can deduct 100% of the cost. If she cleans rooms that are used for both business and personal purposes, apply your Time-Space Percentage to deduct the cost.If you believe that she is spending a greater percentage of her time on business cleaning than your Time-Space Percentage, you can use an actual business use percentage. To use this method you should be keeping records that measure how much time she is doing business vs. personal cleaning.
Helper and House Cleaner
What happens if a person helps you care for children and also cleans your home? With rare exceptions, someone who helps you care for children is an employee and you must pay payroll taxes and file a series of federal and state tax forms. So, if the person cares for children and cleans your home, the IRS is likely to treat all of the amounts paid to this person as wages subject to federal state payroll taxes.
Hiring Family Members
If you paid your spouse or own child to do house cleaning you can also deduct the cost in the same way as described above. However, you should keep careful records that show the days and hours your family members cleaned and how much you paid them. If the amount is $600 or more, issue IRS Form 1099-MISC. The IRS could be suspicious that these are family chores and the money your paid your own children was an allowance and therefore not deductible. Keeping good records and filing this form is for your protection.
If you issue IRS Form 1099-MISC to your child, she must report her income and pay Social Security/Medicare tax on it (15.3%). If you hire your child (under age 18) to help you care for children and treat her as an employee, your child would only have to report her income if it is more than $6,300 (2015 amount). If you pay your husband, he must report any earnings as income.
You can pay your own children an allowance. In this case, you cannot report the amount as a business expense and your child will not have to report it as income.
Other Independent Contractors
If you hire someone to mow your lawn or plow your driveway or maintain your yard, you may also treat them as independent contractors. If the person is self employed, a single member LLC, or partnership issue them Form 1099-MISC if you paid them $600 or more in a year. If the person works for a company then follow the instructions outlined above.
Thanks to Eric Killian, CPA for correcting mistakes in my original article.
Tom Copeland - www.tomcopelandblog.com
Image credit: https://commons.wikimedia.org/wiki/File:House-cleaning.jpg
