Keeping Clean?

If you have an office in your home that qualifies for the home office deduction and you employ a cleaning lady who maintains both your home and your home office, there are a couple of tax considerations to keep in mind.

The amount you pay your cleaning lady for her services can have an impact on the home office deduction. Let’s assume you pay her $200 every two weeks, totaling $5,200 annually. Say your office is 15 percent of your home. In this case, you pay her $780 to clean your office and $4,420 to clean your home.

Here are two key questions regarding the home office deduction:

• Should you pay your cleaning lady through a W-2 or a 1099 for the office cleaning?
• Do you need to pay the Nanny Tax for the home cleaning?

Employee or Contractor Matters

The answers depend on whether the cleaning lady is considered an independent contractor or an employee.

Given the conditions of her work—she cleans with little or no direction, provides her own 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 the cleaning lady 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.

The Sterling Standard

Sterling Tax and Accounting is here to help your business with tax planning!  Our comprehensive approach to tax planning helps reduce your overall tax liability.

If all your accountant does is file your taxes, chances are they are making you pay more than your fair share of taxes.

Learn how to proactively save on taxes by scheduling a call with our tax planning specialists.

Our tax planning, accounting & business services help you stay on track.

Sterling Tax & Accounting will work with you to optimize your business and minimize your taxes.

We will work to provide you and your business with the tools and resources you need to build a solid tax and business foundation.

Welcome to the Sterling Standard of business!  Want to learn more?

Schedule a meeting with our tax planning team here:  https://www.sterling.cpa/contact-us/

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