From AccountingToday, Tom Breedlove discusses common misconceptions about household employees including the idea that a family can treat a household employee as an independent contractor. Tom writes:
Myth #1: The family can classify their employee as an independent contractor.
The IRS considers household workers to be employees (not independent contractors) if the family has the right to control who, what, when or how the work is performed. Over the years, we’ve petitioned the IRS for rulings in a wide variety of scenarios, and in each case, the IRS ruled the worker was an employee. Misclassifying a worker as an independent contractor (by using Form 1099) is considered tax evasion.
And recently, the Department of Labor chimed in on this topic as well. Specifically the DOL cited economic dependence and permanence as two other factors that can determine if someone is an employee. Economic dependence means the worker derives a significant portion of their income from a single source and permanence refers to the structure of the job. Household workers are therefore employees because they typically work for one, maybe two, families and their work goes on into perpetuity until the time when they quit or the family lets them go.
Read the full story at Common Tax Myths About Household Employment and Helpful Truths for Families