Don’t Ignore Household Employee Payroll Tax Rules
If you hire a domestic worker to provide services in or around your home, you probably have a tax liability that you don’t know about – or one that you do know about but are ignoring. Either situation can come back to bite you. When the worker is your employee, your liability includes both withholding and paying payroll taxes as well as issuing a W-2 after the close of the year.
Sure, it is a lot easier simply to pay your worker in cash so as to avoid federal and state payroll taxes – and all the paperwork that goes with them. Your domestic worker will likely be fully cooperative with a cash deal because he or she can also avoid paying taxes. However, if the IRS or your state employment department finds out about these payments, the result could be very unpleasant for you.
Not everyone who performs services in or around your home is classified as an employee. For instance, a plumber or electrician who makes repairs in your home will generally be a licensed contractor; the government does not classify contractors as employees.
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Just a reminder that the last day you may make a tax-deductible purchase, pay a tax-deductible expense, take advantage of tax credits, or make tax-deductible charitable contributions for 2018 is Dec. 31. Every taxpayer’s situation is unique, and the suggestions offered here may not apply to you. The best way to ensure that you are putting yourself into the most tax-advantaged position is to seek tax-planning advice, usually earlier in the year. However, the following are some tax strategies that can be utilized at the last minute.
If you have received an IRS envelope from the Internal Revenue Service (IRS) in your mailbox that does not contain a refund check, it will probably cause an increase your heart rate likely increased. But Don’t panic, though; most of the issues in these letters can be dealt with simply and painlessly.
As it does every year, the Internal Revenue Service recently announced the inflation- adjusted 2018 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable or medical purposes.
“Where’s My Refund?” is an interactive tool on the IRS web site at IRS.gov. Whether you have split your refund among several accounts, opted for direct deposit into one account, or asked the IRS to mail you a check, “Where’s My Refund?” will give you online access to your refund information nearly 24 hours a day, 7 days a week.