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Household Employee and the 1099

Have you recently hired a nanny, housekeeper, private chef, or other person to work in your home? One of the common misunderstandings around household employment is whether you should consider them an independent contractor and provide them a Form 1099-C during tax time.

The short answer is no, you can’t give your household employee a 1099.

Why?

Because the person you’ve hired to work in your home is an employee, not an independent contractor.

Let’s explain.

The Form 1099 is used to report non-employee compensation, which is used for self-employed individuals, sole proprietors, freelancers, and independent contractors. Independent contractors are hired to perform a service and they can complete the job when they want and how they want. They use their own tools and equipment and can set their own schedule. So, if you hire someone to work in your home, set their schedule, and control the work they do, they are considered an employee. Independent contractors work often on a project basis for multiple clients, whereas a household employee generally works for one family and relies on that income to live.

If you choose to treat your employee like an independent contractor pay them ‘off the books’, this is called employee misclassification. If this is discovered by the IRS, you could be liable for tax evasion. This is a big mistake, and you will likely owe back taxes, interest, and other fines that could tally up to thousands of dollars.

Thankfully, we partner with some reliable household payroll companies that can help get your employee ready to go upon initial hire. Working with one of these places will ensure you stay within tax compliance and that you do not risk any problems when it comes time to file taxes.

Want to learn more? Contact us at Household Staffing!

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