House cleaning and the IRS, information most people don’t know!
If you’ve been following my last few blogs, then you know hiring a private individual to do your Northampton house cleaning can be a very risky decision. We’ve already shown the reasons why it is important to work with a house cleaning company that has great insurance as well as a 3rd party fidelity bond. Unfortunately there are still a number of individuals who will overlook the need for good insurance and still hire a private individual.
What most people don’t realize is that if you are not careful, you may wind up owing the IRS a lot of money. By working with a house cleaning company everything is made much more simple. Hiring a house cleaning service means that all the details of employment, including filing all required state and federal paperwork and paying taxes are followed.
When you hire a private individual or independent cleaning person, there are some important requirements to be aware of. According to Internal Revenue Service Publication 926, Household Employer’s Tax Guide, if you hire someone to do household work and if you control not only what work is done, but how it is done, you are considered to have a household employee. If you are going to hire a household employee, it is important to understand your obligations as a household employer. For more information about household employees, see IRS publication 926 at http://www.irs.gov.
If you are a domestic employer and pay your employee in cash or off-the-books, you are liable for unpaid taxes. Furthermore, your employee is not contributing to their Social Security account and may have difficulty establishing credit.
Here is a guide of requirements for you when you pay a household employee $1,400 or more per year:
When you hire a household employee:
- Verify if the person can legally work in the United States and file Form I-9, Employment Eligibility Verification.
- Obtain an employer identification number and possibly a state number.
When you pay your household employee you’ll also need to:
- Withhold 7.65% for social security and Medicare taxes.
- Pay 7.65% for employer’s share of social security and Medicare taxes.
- Withhold federal income tax and possibly state tax.
- File federal and possibly state unemployment returns and pay applicable taxes.
- Keep records.
Additional Other:
- File and give your employee Form W-2, Wage and Tax Statement.
- File Schedule H #Form 1040#, Household Employment, Taxes, and pay related taxes.
- Review insurance requirements with your insurance agent.
This information is not tax advice. You should consult your tax advisor to verify the requirements.
Photo Credit: Flickr: Alykat
