Household Employer Rules - Do I need to W2?
Hello all,
I'm trying to figure out if as a homeowner (not a business/self-employed) I would have to 1099 or W2 someone who helps me rehab my primary residence. That someone would not be a contractor or family member, but unskilled labor from the neighborhood to help when I need an extra pair of hands for heavy objects, or mindless labor like yard work.
Per IRS, "If you made a payment during the calendar year as a small business or self-employed (individual), you are most likely required to file an information return [1099] to the IRS." This seems straightforward that as a homeowner I don't have to 1099 regardless of who's working on my primary residence. Question: does this still hold true if it's cash payments?
However, I'm concerned about the Household Employer rules in IRS Publication 926. It pretty much states that I have to W2 as soon as I direct, supply tools, or control the hours of anyone working on my primary residence (seems very excessive). Are there any exceptions you're aware of, or scenarios this wouldn't apply? If not, are there any good guides out there on how to W2 as household employer and what minimum benefits I would have to provide?
Babak
Anything over $600 you need to 1099 them technically
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#1 Tax, SDIRAs & Cost Segregation Contributor
- Tax Accountant / Enrolled Agent
- Houston, TX
The 1099 requirement does not apply to you because you're rehabbing your personal home and not an investment property. Does not matter how much you pay them and which method of payment you use, including cash.
Whether these helpers should be treated as employees is trickier. Here is how the IRS "explains" this topic: https://www.irs.gov/businesses...
As you can see, it's quite fuzzy and instruct you to "weigh all these factors" while mentioning that "factors which are relevant in one situation may not be relevant in another." Very clear, right? And if you try to google it, you will only get more confused, since online advice is all over the map.
So if you want to be very very careful, you may want to pay for a consultation with an accountant who really understands this area. If you want to avoid this hassle and can sleep well under a cloud of uncertainty - then know that almost nobody considers random laborers to be your employees. Unless, I would say, someone works for you for an extended period of time.
Unlike with 1099s, there is really no short and clear answer about household employees.
