7 Tax Questions From Housekeepers
If you're a housekeeper or maid, or own a cleaning service, learn how to deal with taxes.
Cleaning is tough work and, when you're a housekeeper, no one day is the same as the next. When you do something as varied as cleaning houses, even your set rates can change with each job. And when you throw in filing for taxes or charging a tax on your services, it can get downright confusing.
Here are seven common questions housekeepers ask about taxes -- and helpful answers to walk you through the process
If you have additional questions, hire a professional accountant who can help you with your specific tax situation.
First you need to figure out if you're an employee or an independent contractor.
If you earn over $1,900 from any one client in a calendar year and you fulfill certain job characteristics, the IRS considers that an employer/employee relationship.
"The easiest way to determine if you're an employee of a family is to ask yourself who is in control of the relationship," says Stephanie Breedlove, vice president of Care.com HomePay. "If the family decides when you come to the home, what areas you clean and you use their supplies, you're most likely their employee."
But if you bring your own mops, bleach and dust cloths, clean according to your own preferences and own your own small business, you are an independent contractor, not an employee -- even if you go over that financial threshold.
How Do I File as an Employee?
If you count as an employee, your employer is responsible for withholding Social Security and Medicare (FICA) taxes from your pay and paying employer FICA taxes on your full wages. When this is the case, your employer will give you a Form W-2, so you can file your personal income tax return, not a Form 1099, which is only used for independent contractors.
Do you typically get paid under the table and ignore taxes? Learn about the 7 Reasons NOT to Get Paid in Cash »
How Do I File as an Independent Contractor?
If you're an independent contractor, you'll file your taxes (generally quarterly) using a Form 1099, and you're responsible for paying both the employer and employee portions of taxes. In an employee/employer situation, both parties typically split the Social Security and Medicare taxes owed. As someone who is self-employed, you'll pay both portions of the tax. This IRS guide for those who are self-employed or own a small businesses is helpful.
What If I Own a Small Business?
If you're a small business and employ others, you'll use the Form 944, an employer's annual federal tax return; Form 941, an employer's quarterly federal tax return; and Form 940, an employer's annual federal unemployment (FUTA) tax return. If you employ others, you'll need to file for an Employer Identification Number (EIN) for tax paying purposes.
What if I Work for Several Families?
Unless you own your own company or work through an agency, the $1,900 annual threshold applies to each situation. If you earn $2,000 from one family, $4,000 from another and $2,100 from a third family, each of those families is legally required to pay employer taxes for you.
This process protects both you as an employee and the family who employs you, says Lisa Weinberger, a lawyer and founder of Mom, Esq. You’ll pay into the benefits you may eventually need and your employer will be following the law and avoiding possible felony charges of tax evasion if they don’t. And it’s professional, giving you a work history that can be verified when you apply for a car loan or a mortgage.
What if I Only Earn a Little?
If you have smaller jobs that are employee/employer working relationships, your filing might change. If your three jobs earned $750, $1700, and $900, those employers aren't obligated to pay employer taxes on those amounts. But you do need to claim that money on your personal income tax return as "other income."
Should I Charge Sales Tax?
Some states require a sales tax charge on cleaning services by an independent contractor or a company, but not by an employee, says Diane Yetter, president and founder of YETTER Consulting, a sales tax consulting and tax technology firm, and founder of the Sales Tax Institute.
Check with the proper office in your state (usually a department of revenue, finance or taxation or a board of equalization) to find out if you need to charge a sales tax and how to get the required permit.
Generally, sales taxes need to be paid monthly, sometimes more frequently, and aren't submitted with income taxes. "If you call and you are told [you should be charging a sales tax], you better take action," she shares, as some states track inquires and check to make sure people are in compliance.
Taxes are complex, but once you know what to do, you'll be on the right track!
Julia Quinn-Szcesuil is an award-winning freelance writer and a mom to two girls. She lives in Massachusetts and has written for local and national publications.
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* The information contained in this article should not be used for any actual caregiver relationship without the advice and guidance of a professional advisor who is familiar with all the relevant facts. The information contained herein is general in nature and is not intended as legal, tax or investment advice. Furthermore, the information contained herein may not be applicable to or suitable for your specific circumstances and may require consideration of other matters.