A new IRS disaster is waiting to fall on those of you who employ household help. The term employ is pretty loose. It can mean paying the neighbor to mow the lawn, clean up the animal pens, or the kids across the street to baby sit. This includes day care for children, care for elderly, fix-up and other items.
It becomes an issue when you exceed a total payment of $1100 in one year. That makes all of the salary paid to everyone, retroactively, subject to all of the rules in withholding as an employer. We can deal with it very easily for you, but you need to keep records and decide if you pay more than $1100.00 in total for household help.
Generally speaking, you are the employer if you make a check payable to an individual's name. A check made out to Jane Smith probably makes you her employer, but a check made out to Jane Smith Child Care Service, does not. Right now, IRS is not closely monitoring this area, but they will.
For example, if you show child care expenses paid to an individual or if IRS calls your home and a housekeeper answers, they will look at your return. If they see no taxes paid for household help, it may be a problem. Also if your return is audited (up to three years from the filing date), and if they are more rigorously enforcing these laws, the audit will be under the same rigorous standard.
If you have any questions in this area, please contact us.
Sandra Eve Kardos CPA
800-924-5221 FAX 800-606-2036
PO Box 9333 Van Nuys CA 91409
with offices in Acton, and Ridgecrest, CA
Or E-mail at kardoscpa@mindspring.com