Who determines if I am an independent contractor or a household employee?

[jbuktenica]

I provide casual healthcare to my friend who lives in my house and is using his long term insurance to pay me $130/day. The insurance company has designated me as an independent contractor. I am concerned that there is an upper limit determined by the tax code to the amount I can earn as an independent contractor.

[Coleen3 · Accepted solution]

The insurance company's determination doesn't have any sway over IRS rules. It's what they consider to be an employee that counts for tax purposes. They may be basing it on the child care services below.

Do You Have a Household Employee?

You have a household employee if you hired someone to do household work and that worker is your employee. The worker is your employee if you can control not only what work is done, but how it is done. If the worker is your employee, it does not matter whether the work is full time or part time or that you hired the worker through an agency or from a list provided by an agency or association. It also does not matter whether you pay the worker on an hourly, daily, or weekly basis, or by the job.

Example.

You pay Betty Shore to babysit your child and do light housework 4 days a week in your home. Betty follows your specific instructions about household and child care duties. You provide the household equipment and supplies that Betty needs to do her work. Betty is your household employee.

Household work.

Household work is work done in or around your home. Some examples of workers who do household work are:

Babysitters,

Caretakers,

House cleaning workers,

Domestic workers,

Drivers,

Health aides,

Housekeepers,

Maids,

Nannies,

Private nurses, and

Yard workers.

Workers who are not your employees.

If only the worker can control how the work is done, the worker is not your employee but is self-employed. A self-employed

worker usually provides his or her own tools and offers services to the general public in an independent business.

A worker who performs child care services for you in his or her home generally is not your employee.

If an agency provides the worker and controls what work is done and how it is done, the worker is not your employee.

Example.

You made an agreement with John Peters to care for your lawn. John runs a lawn care business and offers his services to the general public. He provides hisown tools and supplies, and he hires and pays any helpers he needs. Neither John nor his helpers are your household employees.