Self-Employed Caregivers & 1099 Taxes

If she's an employee, the IRS will expect you to tax her like one.

If she's an employee, the IRS will expect you to tax her like one.

The 1099-MISC form works for self-employed professionals the way a W-2 does for employees. A business that hires a freelance web designer, for instance, sends her a 1099-MISC showing what she earned if it pays her $600 or more in a year. If you hire a nanny for your kids or a nurse for your father, the rules are trickier.

W-2 or 1099 Form for a Caregiver

The government has rules for what counts as self-employment. If you drop your kids off at a day-care center, the owner is probably self-employed. A nanny who lives in your house is more likely an employee. The Internal Revenue Service has specific tests to determine employment status, such as whether you control how the caregiver works. If, say, you have the right to tell your nanny when and how to take care of your kid, you probably have an employer-employee relationship.

If you hire a caregiver who's genuinely an independent contractor, don't worry about sending a 1099. The 1099-MISC form is reserved for businesses that hire the self-employed. Hiring an independent contractor for personal services doesn't trigger the same requirement, no matter how much you pay, so you may not need to send a 1099 for a nanny. If, however, the caregiver qualifies as a household employee, you have to send him a W-2 reporting his household employee income for the year and any taxes you withheld.

If you pay an employee-caregiver more than $2,000 per year as of 2017, or $2,100 or more per year starting in 2018, you have to take Social Security and Medicare taxes out of her pay. If you pay more than $1,000 in a single quarter, you also have to pay unemployment tax. You never have to withhold federal income tax, though you can if she requests it. If your "employee" is your spouse, your under-21 kid or your parent, you don't have to take out any withholding, even if you pay her for helping you. The IRS 926 publication provides further information.

If a caregiver is self-employed, he or she can deduct business expenses from his or her taxes. Self employed caregiver tax deductions can include supplies, uniforms, equipment and insurance.

When You're Not Sure

If you're not sure whether your caregiver is an employee, you can use Form SS-8 to ask the government to make the call. If the result is "employee," the IRS recommends you contact your state government. State law determines whether you have to withhold any state taxes from his pay and whether you have to take out workers' compensation insurance. The insurance covers employee injuries. Your homeowners liability policy won't protect your caregiver if he's hurt on the job.

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About the Author

A graduate of Oberlin College, Fraser Sherman began writing in 1981. Since then he's researched and written newspaper and magazine stories on city government, court cases, business, real estate and finance, the uses of new technologies and film history. Sherman has worked for more than a decade as a newspaper reporter, and his magazine articles have been published in "Newsweek," "Air & Space," "Backpacker" and "Boys' Life." Sherman is also the author of three film reference books, with a fourth currently under way.

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