I received the following questions regarding paying family members for cleaning services. I thought you might be interested in the questions and responses.
Larry, I'd like to pay my mother to clean my office? She doesn't have to file a tax return and I'd like to know how much I could pay her without making it so she has to file. And what about this 1099 business? Thanks in advance for the info.
Marla
Marla, if you pay your mother under $600 you are not required to give her a 1099. That’s the good news. The bad news is that if your mother’s net income is over $400 she is required to file a tax return. She may not have any federal income tax but she would have social security tax on the $600 less the expenses.
If you think about it, assuming you paid her $1,000 and it saved you $333 but at the same time it cost her $150, as a family you’d be saving $183. Maybe what you should do is go ahead and pay her the $1,000 and then make a gift to her for her taxes. You will still be ahead of the game.
I hope this is helpful. Let me know if you need anything else.
Larry Kopsa, CPA
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Larry, I'm thinking about hiring my Aunt to clean my office. She doesn't have a job right now but does receive a social security check. I'd like to pay her $1,500 for the year. My question is - would this be deductible?
Patty
Patty, I hope this finds you well. Your question was that you would like to pay your Aunt $1,500 for cleaning the office. I have some good news and bad news. First the good news: yes, you are able to deduct the $1,500 as a business deduction. Depending on your level of income, this would save you not only federal and state income but also social security tax. I normally estimate this to be at a 33% tax rate so the $1,500 you are paying her would save you $500 in taxes.
The second piece of good news is that you most likely could treat this individual as an independent contractor. As such, you would not need to give her a W-2 Form. Since you are paying her over $600, you would have to give her a 1099 Form.
Now for the bad news: this $1,500 would be considered income to your Aunt. Since this is her only source of income besides probably social security, she would not have to pay federal or state income tax but she would be required to file a tax return and pay social security tax. If she had no expenses to offset this $1,500, most likely this would cost her 15% or $225. I hope this helps. Please let me know if you have any other questions.
Larry Kopsa, CPA
