We are running our Airbnb.com rental from out of state, so that makes it very hard to clean up between guests. We realized right away that if we wanted to make this work, we'd need a house cleaner/manager.
We found an amazing woman who helps us run the business. She's vital.
In the early days, I was trying to figure out if she was an employee or not. "What does it matter?," you might ask. Well, if you hire an independent contractor, that person pays their own taxes and worker's comp insurance. If you hire a domestic worker (a nanny, a cleaner, etc.) they are your employee and whether you like it or not and you are responsible for their taxes and their worker's comp insurance. If you ignore this, as many do, you could be found out by the IRS. They can charge you back taxes for all the time you've had your employee, and even worse, if you haven't bought worker's comp, you could be sued by your employee if he or she gets injured on the job.
Being unsure, I asked a lawyer, and another one, and another one. They all had different answers. The only thing I figured out was that the IRS has a set of criteria they judge employee status by.
You have an Employee:
- if you control when and how often someone works in your home: an employee is required by an employer to work particular hours. If you have any say whatsoever in when a worker completes a job and how they do it, then that person is an employee.
- if he is important to your business: an employee is usually necessary to the business. For example, a cleaner, a manager, and a cook could be employed in a hospitality business, but a plumber, a carpenter, and an accountant don't fill the same type of role.
- if you provide supplies: providing supplies for a worker means there's a measure of control in how she does the job, and the more control you have, the more likely it is that your "worker" is an employee.
You use an Independent Contractor:
- if she provides the same services for other people: a worker who runs her own business, advertises and completes similar jobs for lots of other people likely is not your employee (examples: a plumber, an accountant, a designer)
- if he brings his own supplies: a worker who brings his own supplies is an independent contractor (example: a carpenter brings tools to the job site, a designer has her own computer - these people don't rely on an employer to provide these things.)
- if she can control when and how she does a job: independent contractors usually let you know when they can come and complete a job, not the other way around.
See how confusing this is? I could argue either way for our house cleaner. In the end of the day, though, her services are essential to our business, and that's the sticking point for me. I bit the bullet and made her a legit employee. Why lie to yourself when the lie might not hold up with the IRS? I would rather do it too right than sort of wrong.
We set our house cleaner up on payroll. We use a service called Paychex to issue checks monthly and deduct the proper taxes on our employee's behalf. We are set up correctly, so there's no worry that the IRS will find out we're hiding something.
We also bought our employee a worker's comp policy through State Worker's Insurance Fund. Now if she gets hurt on the job, she can get the proper compensation.
When it comes to doing it right, it's more work, but now I can relax!