Due to the 2020 global pandemic, my wife and I were concerned about indoor exposure to others. We are fortunate that we can work from home, so that we are always here and no one else is allowed into our home.
Because of this, we've tried to take precautions not to be home when our housekeeper comes to clean. This is not always possible. So we asked her to skip cleaning our house on the days we were home.
Understanding that times are difficult, we continued to make payments to her for the weeks we asked her to stay home. My question is, because we gave her money but no work was done, should she consider that income or a gift?
While it won't change my taxes, it would definitely affect yours. Would it help if I provided a statement of all payments, and which ones were for the actual cleaning, along with a letter stating our position that the others are gifts?
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With so many domestic workers losing money during the pandemic, I want to thank you for realizing your housekeeper's financial needs by paying her and looking for ways to give her money. During this time, others have difficulties paying their housekeepers at all. Many domestic workers are undocumented and not entitled to unemployment. You are lucky enough to be healthy and can afford to pay your housekeeper anyway and consider that you choose to do it.
I sought the expertise of Bill Smith, General Manager of the National Treasury at CBIZ MHM, a business consulting, tax and financial services company. Assuming she is a W-2 employee, "All of this will most likely be considered a wage as the person is still controlling the employee," he says. “The domestic worker is paid to remain under his control as an employee. Because she has to wait and wait until she is released, it is equivalent to work. "
Is your housekeeper an independent contractor or a W-2 employee?
Internal Revenue Service Publication 926 states, “You have a domestic worker if you have hired someone to do the housework and that worker is your employee. The co-worker is your co-worker when you have control not only of what work is done, but also how it is done. If the employee is your employee, it doesn't matter whether the work is full-time or part-time, or whether you hired the employee through an agency or from a list provided by an agency or association. "
The agency gives this theoretical example: "You pay Betty Shore to look after your child and to do light housework at home 4 days a week," it says. “Even if the employer wants to shorten the employee's time and give her a nice Christmas present, the result is probably the same. The IRS will likely view the gift as payment for not looking for other work because of the reduced time, which is equivalent to paying her for standby time. “It's part of taxes, part of the philosophy of logic. That's the IRS!
What if she is an independent contractor? If you are giving $ 600 in a tax year, you must submit a 1099-MISC Form. “If only the employee can control how the work is done, the employee is not your employee, but independent. A self-employed person usually provides their own tools and services to the general public in an independent company, ”says the IRS. As an independent contractor, your housekeeper could write off worn clothes, gasoline / mileage, and cleaning supplies for the job.
Thank you for keeping your housekeeper busy and looking for ways to make her life easier, even if it doesn't affect your own finances. Your willingness to lighten the financial burden on your housekeeper is in itself an act of goodwill. The German Enlightenment philosopher Immanuel Kant wrote: "A good will is good, not because of what it causes or achieves, not because of its ability to achieve an intended goal, but only because of its will."
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