Is Your Babysitter an Employee? It Matters to Tax Liability

From the New York Times, Ann Carrns writes about the difference between an employee and independent contractor for household workers such as nannies and caregivers.  Ann provides guidance on worker classification in an area often overlooked.  She writes:

“TAX time can be particularly taxing for families who pay an in-home caregiver or housekeeper.If the worker is considered an employee — rather than an independent contractor — you, as the employer, are responsible for paying payroll taxes and reporting the details to the Internal Revenue Service. They’re often called “nanny taxes” but they can apply to other workers, like caregivers for elderly people, too.

How can you tell if a worker is your employee? Some people focus, incorrectly, on the worker’s title, or whether they are full time or part time, said Laura Weiland, president of the Nanny Tax Company, in Park Ridge, Ill.: “In their heads, they say, ‘I just have a babysitter; she’s not a nanny.’

But the I.R.S. looks at other criteria, like how much you paid the worker, and how much say you have over how he or she does the job. If you regularly direct details of the worker’s activities and set the hours, the I.R.S. generally considers the person to be your employee, although other factors may come into play. If they use their own tools, and also work for others — like, a landscaper who uses his own equipment to mow lawns — they’re typically considered self-employed.

“If you control the work — what’s done, when it’s done — they’re probably an employee,” said Gregg Wind, a certified public accountant in Los Angeles…”

Read the full story at  Is Your Babysitter an Employee? It Matters to Tax Liability

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