My client paid her sister to care for their father, part of 2016. As I read Pub 926, no employment taxes are due so we are going to 1099. My question is, should it be other income vs nonemployee comp
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Why would a 1099-MISC be issued at all? Only businesses need to send out 1099s, not Individuals.
If the sister is not working in your client's home, I agree, she is not a Household Employee. However, if it is in your client's home, the sister might be considered a Household Employee. -
My client planned on using it for an accounting to social securityComment
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Make that VAComment
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Sounds like an employee W-2 situation. Especially if she performed services in the subject's home, even if no employment taxes are due. You did not specify the amount paid.Comment
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Schedule H is likely needed
If the sister performed the services stated in the home of the father, then THE FATHER is responsible for filing the Schedule H dealing with any Soc Sec/Med/FUTA/SUTA etc.
That is a reason why Schedule H can be filed as a stand-alone form (see Schedule H, lines 26 and 27).
Hiding all of this with a Form 1099-MISC could be viewed as. . .evasive and/or improper. (More facts of relevance needed.)
FEComment
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I agree, that more facts are needed.
It seems to be the client, not the father that is paying for the services. If the client is paying for services in somebody else's home (such as the father's home), I don't see how the father could be responsible for anything, or that it could be viewed as a Household Employee when it is somebody else's home.Comment
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The client can pay for it. It is treated as a gift to the father (paid on his behalf) unless this client is claiming her father as a dependent in which case she can deduct the medical expense if she qualifies. The Schedule H should be filed alone if no other return is required. And a W-2 issued. FEDUKE404 is correct when he says the father is considered the employer. Apparently the VA is requesting the information because of benefit calculations for someone.Last edited by Burke; 01-16-2017, 02:19 PM.Comment
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Schedule H considerations
Unless convinced otherwise, my position remains that the person working in the home of the father is, indeed, a "household" employee within the purvey of Schedule H.
Therefore, the previously mentioned taxes (to include FUTA/SUTA) must be handled by the father, either by adding Schedule H and related payments to his tax return **OR** by filing a stand-alone Schedule H.
Issuing a Form 1099-MISC is probably not the proper move, with the facts provided. Everything seems to indicate, strongly, a "household employee" scenario is in play.
As to who can deduct the allowable payments for the care of the father. . .well, that is a different topic entirely.
FEComment
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Let's make up this scenario: I pay for somebody to regularly come to FEDUKE's house to clean the house, cook and take care of children. I am the one organizing it and paying for it. Are you saying that YOU are responsible for filing Schedule H, and paying employment taxes?Comment
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Read IRS househhold employee definition
Unless you are making contracted payments to "Joe's Home Services" then the answer is yes.
Read pages H-2 and H-3 of the IRS instructions ("Do you have a household employee?") as described for Schedule H:
The gray zone is what work is done and how. Most services as described previously for the father would likely fall into the "employee" range, due to the various duties described. That scenario is different from having "Bob's Lawn Service" stop by to cut the grass and trim the shrubbery.
Who pays for the services is irrelevant for matters related to household employee status and Schedule H. If the person performing the work does so under the guise of the homeowner (or the bill payer), then the Soc Sec/Medicare/FUTA/SUTA etc payments and required reporting are clearly the responsibility of the homeowner. If there is a valid MEDICAL deduction in play (housekeeping, cooking, etc. generally do not rise to that level!), then the dependency status of the father could become relevant as a totally separate issue.
Quite frankly, I'm surprised no one has asked about filing a Form 1099-MISC and (erroneously) listing payments as "other income" so as to avoid any self-employment tax issues for the payee. Leaving the "painting houses is not a job" argument for such avoidance in the dust is the most common end run for that.
FEComment
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I'm not necessarily saying you are wrong, but it just doesn't sit right with me.
As for the "Do you have a household employee?", the first sentence says "If you hired someone to do household work and you could control what work he or she did and how he or she did it, you had a household employee."
In my example scenario, it is ME that hired somebody and I have control over what she does, not you.
Again, I'm not necessarily saying you are wrong, but it doesn't make sense to me.Comment
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