Tax question: our former full-time nanny is now our once-a-week housecleaner.... taxes?

[Anonymous]

Hi, wondered if anyone has thoughts on this. After six years as our full-time nanny and housekeeper, our kids were getting older and our nanny went to work for another family. However, she still comes by once a week to do a few hours of cleaning for us. While she was our nanny we used a payroll service and paid all employer taxes, etc. We are still doing that, even though she now works just a few hours a week. It occurred to me recently that we probably don't need to do this anymore: that is, it seems to me that she now meets the IRS definition of a independent contractor in her work for us:

- She sets her own hours: she basically comes when it is convenient for her, so the hours vary; we pay her $150/week gross and sometimes she stays for three hours and sometimes she stays for six hours, depending on what she does
- She sometimes brings her grown daughter to help her (she doesn't ask us -- she just sometimes shows up with her daughter, whom we know)
- We don't give her specific instructions on what to do or how to do it: she knows the house and pretty much does her own thing; while sometimes I say, "could you give the guest room a good cleaning" or whatever, she mostly decides for herself how often and how to clean particular things
- She brings her own cleaning supplies, though she also uses ours sometimes.

Thoughts? She doesn't have a cleaning company or advertise regularly, she just cleans for a few families she knows well. I don't want to run afoul of the IRS -- but also don't particulrly want to pay employer taxes and the hefty fees charged by the payroll company if I don't have to. I was thinking of just asking her what she wants me to do, since obviously there is a trade-off: if I stop paying employer taxes she is free to decide to not declare her cleaning income to the IRS, which would save her some money (I figure this is between her and her own conscience), but on the other hand if I stop paying employer taxes it potentially reduces her social security payments somewhere down the line. From the perspective of my legal obligations (as opposed to hers...), does it seem reasonable to stop paying employer taxes if she is okay with that?

thanks!





and I thought I might ask her what she prefers.

[Anonymous]

If she tells you she's an IC, than yes, she is under the circumstances.

[Anonymous]

What if you give her a 1099 (which would seem very reasonable under the circumstances) and raise her hourly rate to cover the difference in employment tax. This would mean she wasn't out any money. You can assume it's a wash if she declares the income. If she decides to not declare it, the illegality and loss of SS is on her. You would save the cost of the payroll service.