Sandy, The Cleaning Lady & The Home Office Deduction

I wanted to offer some insights

regarding an important tax aspect related to the cleaning services at your home office. As you know, I have two daughters (a 2-year-old and a 6-month-old), and I plan to be very involved in their lives. With that being said, I have started working from home on Mondays and Fridays to see them more. I have a home office, and not only does this give me more face time with my kids, but it also serves as a very powerful tax deduction. To spend more quality time with my girls, I have outsourced the cleaning to our housekeeper, and she does an amazing job.

Do you have a home office?

If you have a home office that qualifies for a home-office deduction and you employ a cleaning lady (let’s call her Sandy) who maintains both your home and your home office, you need to be familiar with tax considerations.

First, the amount you pay Sandy for her cleaning services ca affect your taxes. You pay Sandy $200 every two weeks, totaling $5,200 annually. Given that your office is 15 % of your home, you pay Sandy $780 to clean your office and $4,420 to clean your home.

Here are two key questions:

• Should you pay Sandy through a W-2 or 1099 for the office cleaning?

• Do you need to pay the Nanny Tax for the home cleaning?

The answers depend on whether Sandy is considered an independent contractor or an employee. Given the conditions of Sandy’s work—she cleans with little or no direction, provides her supplies, and cleans many other houses—she exhibits the characteristics of an independent contractor. Accordingly, for the $780 you paid her to clean your office, you should provide her with a 1099-NEC form. On the personal front, you are not liable for the Nanny Tax because Sandy qualifies as an independent contractor. Please note that if you fail to file Form 1099-NEC, you could face an intentional disregard penalty of $630 or more for each missed form.

If you would like to discuss the Nanny Tax or 1099-NEC requirements, please call us on our direct line at 803-833-3582.

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