Tenant working off rent - tax consequences?

[Brandon Turner]

I recently hired one of my tenants in an apartment to work for me at the apartment complex, doing maintenance work. (He is a close friend - I do not recommend letting tenants work for you).

If he works in exchange for rent, does anyone know if he is classified as an "employee" and thus subject to FICA tax withholding, workers comp, or industrial insurance (L&I in Washington State)? And if he works more than whats required to pay rent, and I pay him hourly, how is that looked at?

I did the calculations and it would cost me almost $500 per month extra to classify him as an employee.

Thanks!