account. Maybe nobody even thought about it. Well, one thing leads to another, and, after a few seconds of deliberation, the IRS determines that the housecleaner was a household employee all those years—not an independent contractor as you had supposed. All of a sudden, you may be looking at a sizable tax bill.
IRS Rulings on This Subject
To test these waters, I filed three sets of Form SS-8 with our local IRS public affairs officer. These forms are called “Information for Use in Determining whether a Worker Is an Employee for Federal Employment Taxes and Income Tax Withholding.” Whew. The IRS officer let me fill out this form with hypothetical cases, and agreed to make hypothetical rulings based on my three examples:
1. I filled out the first form as if I were the housecleaner. I described myself as an individual cleaner who cleans five different homes during the week, is expected to be there on a certain day, and is paid by the hour. I follow a list if left by the homeowner; otherwise I do the “normal cleaning.”
2. I filled out the second form as if I were the homeowner. The working conditions were the same as in Form 1. I said I hired him because—on a different day of the week—he works for a neighbor who raved about his work.
3. I filled out the third form in exactly the same way as Form 2, except I said I hired the cleaner after finding a mimeographed flyer under my car’s windshield wiper. In the flyer, the business was identified as “Ruth’s Cleaning” and a phone number was given.
The IRS ruled that the housecleaner in all three cases was a “household employee.” They based their decision on the control factor alone.The IRS felt the client directed the housecleaner’s work. That was enough for them—even in the case where the flyer was left soliciting business.
What the IRS Calls Your Housecleaner
It appears that the IRS regularly rules against many people who hired housecleaners who they thought were independent contractors, ruling instead that they are in a special category called “household employees.” Here’s the IRS’s definition of the term:
A homeworker who works by the guidelines of the person for whom the work is done, with materials furnished by and returned to that person or to someone that person designates.
Unlike standard employees, you do
not
have to withhold income taxes on wages paid to a household employee for services performed in or around your private home (unless the employee asks you to and you agree to do so). But if you pay a household employee $50.00 or more during a calendar quarter, you must withhold the employee’s share of Social Security tax (FICA) from his or her wages, and you must match that amount from your own funds. It doesn’t matter whether wages are based on the hour, day, week, month, or year. The value of food, lodging, clothes, bus tokens, and other noncash items given to household employees is
not
subject to FICA tax.
The IRS Will Make a Ruling for You
Tax regulations are almost always open to interpretation, and the employment status of your housecleaner may still require clarification before you feel confident of how to proceed. You may request the IRS to make a ruling for your particular set of facts and circumstances by filling in Form SS-8—the same one I sent in with three fictitious examples.
However,
this is
not
confidential information. If the IRS rules against you, they may follow up on it to see if you made any necessary changes.
How to Comply: Federal Requirements
If it turns out that your housecleaner is your employee, it really isn’t too time-consuming or complicated to comply with these tax requirements. We’ve listed below the basic steps and the IRS forms you’ll need. The forms are available at IRS offices or by calling 1-800-424-FORM. For additional general information on the subject, also request Publications 926 and 937 and Circular E. We must make the disclaimer that we’re not tax experts, so be sure to
IRS Rulings on This Subject
To test these waters, I filed three sets of Form SS-8 with our local IRS public affairs officer. These forms are called “Information for Use in Determining whether a Worker Is an Employee for Federal Employment Taxes and Income Tax Withholding.” Whew. The IRS officer let me fill out this form with hypothetical cases, and agreed to make hypothetical rulings based on my three examples:
1. I filled out the first form as if I were the housecleaner. I described myself as an individual cleaner who cleans five different homes during the week, is expected to be there on a certain day, and is paid by the hour. I follow a list if left by the homeowner; otherwise I do the “normal cleaning.”
2. I filled out the second form as if I were the homeowner. The working conditions were the same as in Form 1. I said I hired him because—on a different day of the week—he works for a neighbor who raved about his work.
3. I filled out the third form in exactly the same way as Form 2, except I said I hired the cleaner after finding a mimeographed flyer under my car’s windshield wiper. In the flyer, the business was identified as “Ruth’s Cleaning” and a phone number was given.
The IRS ruled that the housecleaner in all three cases was a “household employee.” They based their decision on the control factor alone.The IRS felt the client directed the housecleaner’s work. That was enough for them—even in the case where the flyer was left soliciting business.
What the IRS Calls Your Housecleaner
It appears that the IRS regularly rules against many people who hired housecleaners who they thought were independent contractors, ruling instead that they are in a special category called “household employees.” Here’s the IRS’s definition of the term:
A homeworker who works by the guidelines of the person for whom the work is done, with materials furnished by and returned to that person or to someone that person designates.
Unlike standard employees, you do
not
have to withhold income taxes on wages paid to a household employee for services performed in or around your private home (unless the employee asks you to and you agree to do so). But if you pay a household employee $50.00 or more during a calendar quarter, you must withhold the employee’s share of Social Security tax (FICA) from his or her wages, and you must match that amount from your own funds. It doesn’t matter whether wages are based on the hour, day, week, month, or year. The value of food, lodging, clothes, bus tokens, and other noncash items given to household employees is
not
subject to FICA tax.
The IRS Will Make a Ruling for You
Tax regulations are almost always open to interpretation, and the employment status of your housecleaner may still require clarification before you feel confident of how to proceed. You may request the IRS to make a ruling for your particular set of facts and circumstances by filling in Form SS-8—the same one I sent in with three fictitious examples.
However,
this is
not
confidential information. If the IRS rules against you, they may follow up on it to see if you made any necessary changes.
How to Comply: Federal Requirements
If it turns out that your housecleaner is your employee, it really isn’t too time-consuming or complicated to comply with these tax requirements. We’ve listed below the basic steps and the IRS forms you’ll need. The forms are available at IRS offices or by calling 1-800-424-FORM. For additional general information on the subject, also request Publications 926 and 937 and Circular E. We must make the disclaimer that we’re not tax experts, so be sure to
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