5 Unassuming Home Professions You are Supposed to be Paying Taxes On
You are not paying enough taxes. That’s right; you are not paying Uncle Sam enough. But it is not on your income you are not paying enough. No, it is on someone else’s income you are not paying enough for. Confused? Many people are.
Believe it or not, you are supposed to be reporting and depositing payroll taxes for a number of household professionals you may be using. As odd as that may sound, it is true. The law in the United States and in many states require you to pay these taxes on individuals you pay to perform services around your house.
Although the pay for these services may not be enough to require income be withheld for federal taxes, you are almost guaranteed to have to pay Social Security and Medicare taxes on these individuals. Below, we take a look at some of these professions you are not paying enough taxes for.
There are many landscaping companies out there that have several employees working for them. They are typically already paying taxes on the people on their payroll. But what about the neighbor boy who mows your lawn every week? Surprising to most, you are indeed supposed to submit payroll taxes on them. If that neighbor boy is 18 or older, you should be keeping track of, and depositing money for, the work they perform. Anyone under this age is exempt from having payroll taxes deducted.
The same goes for if you hire a person to maintain your garden. This could be a hobbyist just looking to make a few extra dollars doing something they love. If they do not work for a landscaping company then they work for you, and you are supposed to be filing payroll taxes on them.
Just as with the gardener or neighbor boy maintaining the yard for you, any independent individual who is not already having taxes deducted from their paychecks should have them deducted from yours. This includes the woman who comes in every week or every day to dust the shelves, sweep and mop, the floors, scrub the bathtub and toilets, and make the bed. Technically, they should be on your personal payroll.
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If you have kids, then you know the need to get away sometimes. This is when parents will resort to a babysitter. They will either use a sitter service that can find a person for them, or they will find their own. Often, this is a neighborhood teenager looking for a little extra spending money or the child of a family friend — it could even be the family friend themselves. If payment is arranged for them to watch your kids, you are probably supposed to pay taxes on them. Again, the age of the babysitter is the determining factor here as to whether or not you are required to do so.
This also goes for a nanny. If instead of taking your children to daycare you hire a nanny, that person’s income is taxable and legally your responsibility to pay. Whether you hire someone for strictly daytime or live-in, make sure to file payroll taxes on your nanny.
The Family Business
If you hire your own child, do you have to withhold taxes on them? What about hiring another family member? Are you required to pay taxes on them? The answer is not a simple “yes” or “no.” There are a few factors to look at, the first being the age of the child. Social Security and Medicare taxes (FICA — Federal Insurance Contributions Act) do not have to be deducted from anyone 17 years of age or younger. Federal income taxes do not have to be withheld either until the child turns 21.
This is all dependant on if the child is yours. Hiring a niece or nephew who falls below the age triggers does not exempt you from filing income taxes on them. They must be your personal children, whether they are biological, a step-child, or adopted.
Thirdly, your business must be your business. You must be the sole proprietor of the business. This is the only way to exempt your children from taxes. Partnership ownerships are allowed only if both parents are the owners. Any other form of business ownership, including single-parent partnerships or corporations where a parent is an owner, must file payroll taxes on the children in question.
Although oftentimes caretaker professionals will be employed by an agency who determines the scope and procedures of the work to be performed, there are plenty of independent caretakers in homes taking care of people who are not able to care for themselves. Since they are a household employee, executing duties and completing tasks the way you would like them to be done, they are your responsibility to submit taxes for.
The only way around having to file on someone who works in your household would be to have the individual file a Form-1099, which is a tax form for self-employed people. This would have to be agreed upon by both parties, but it comes with financial backlash for those filing as such; that 18-year-old babysitter may end up having to pay more in taxes than the temporary job is worth. Because of the criteria for a 1099 — which would include contractors and freelancers (such as lawn boys or nannies) — these types of employees could have more of their money taken from them and not want to work for you anymore.
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Pay your taxes! Or rather: pay their taxes! If they are not already claiming 1099, withhold the taxes for them. Keep them happy so that you can continue to rely on their services. Though many of the workers in some of these fields are younger, they can usually provide equal quality or better than those employed by a professional agency. It will also keep the states and the IRS off of your backs.