common sense definition

In general, if someone does domestic work for you, not associated with your trade or business, and you pay that worker directly, they are considered your household employee and subject to the rules on household employment taxes.

In general, if a worker is sent by an agency, and you pay that agency, and do not pay the worker, they are not considered your household employee.

In general, if a worker runs their own business, advertises their services to the general public, invoices you and other customers, files their own business tax returns, they are not considered your household employee.

Whether a worker works full-time or part-time makes no difference.

Whether you pay a worker hourly or by a pay period makes no difference.

See exclusions below.

 exclusions

• Your spouse is not your household employee.
• Your child under the age of 21 is not your household employee for federal purposes. California sets the limit for this exclusion at under age 18.
• Your parent is usually not your household employee, except in certain special cases.
• A worker under the age of 18 who is a student is not your household employee.
• You can pay small amounts of household employment wages before becoming subject to the filing requirements. Be sure to check both federal and state wage thresholds before deciding whether you are required to file and pay taxes. (see welcome page at left)

 definitive determination

This common sense definition is not official or definitive in any way, but it is easy to understand.

Various state and federal publications contain definitions of household employment.

If you need an official determination, please go to the appropriate tax authorities for a determination of whether you are officially a household employer.

The U.S. Federal government, for instance, has a form titled Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding. (see fed forms at left)

 irs definition from publication 926, household employer's tax guide

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 by the following people.
Babysitters
Cleaning people
Housekeepers
Nannies
Health aides
Private nurses
Maids
Caretakers
Yard workers
Similar domestic 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 his own tools and supplies, and he hires and pays any helpers he needs. Neither John nor his helpers are your household employees.

More information. More information about who is an employee is in Publication 15-A, Employer's Supplemental Tax Guide.

 definition from the california employment development department

Taken from EDD Publication DE-231.

Who Is an Employee?
An “employee” includes ...

• Any worker who is an employee under the usual common law rules...

An employee may perform services on a less than fulltime or permanent basis. The law does not exclude services from employment that are commonly referred to as day laborers, part-time help, casual labor, temporary help, probationary, or outside labor.

Who Is a Common Law Employee?
A common law employee is an individual who is hired by an employer to perform services and the employer has the right to exercise control over the manner and means by which the individual performs his or her services. The right of control, whether or not exercised, is the most important factor in determining the relationship. The right to discharge a worker at will and without cause is strong evidence of the right of direction and control.
Other factors to be taken into consideration are:
1. Whether or not the one performing the services is engaged in a separately established occupation or business.
2. The kind of occupation, with reference to whether, in the locality, the work is usually done under the direction of a principal without supervision.
3. The skill required in performing the services and accomplishing the desired result.
4. Whether the principal or the person providing the services supplies the instrumentalities, tools, and the place of work for the person doing the work.
5. The length of time for which the services are performed to determine whether the performance is an isolated event or continuous in nature.
6. The method of payment, whether by the time, a piece rate, or by the job.
7. Whether or not the work is part of the regular business of the principal, or whether the work is not within the regular business of the principal.
8. Whether or not the parties believe they are creating the relationship of employer and employee.
9. The extent of actual control exercised by the principal over the manner and means of performing the services.
10. Whether the principal is or is not engaged in a business enterprise or whether the services being performed are for the benefit or convenience of the principal as an individual.
11. Whether the worker can make business decisions that would enable him or her to earn a profit or incur a financial loss. Investment of the worker’s time is not sufficient to show a risk of loss.

The right to control the means by which the work is accomplished is clearly the most significant test of the employment relationship and the other matters enumerated constitute secondary elements. In considering the factors, a determination of whether an individual is an employee will depend upon a grouping of factors that are significant in relationship to the service being performed rather than a single controlling factor.

Who Is Not an Employee?
Independent contractors are not employees. They are engaged in separately established bona fide businesses. A bona fide business is subject to profit or loss. They are usually contracted to perform specific tasks, and they have the right to control the way the work is to be accomplished. They have a substantial investment in the business and perform services for more than one business. Generally speaking, they are anyone who is not an employee under the common law rules unless they are statutory employees.