Daycare Tax Tips


Daycare worker wants to be an independent contractor

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A family child care provider writes:

> I am ready to hire someone for summer. However, the "employee" I am about to hire would like to offer his services as an independent contractor (1099). Do I just hand him the 1099-MISC and pay him weekly per contract? Is there something that needs to be withheld?

Here's the thing--it is not up to the worker to define whether the position offered is an employee position or an independent contractor position. That is defined by the nature of the work, where the work takes place, the amount of supervision, and other factors. I don't believe there's any way to categorize a child care worker as an independent contractor, unless they have specialized skills (story teller, tutor, etc.) and come onto the premises and perform their work with little direction from you.

It is quite common for workers to ask to be treated as an independent contractor, but not wise for you to agree, unless they fit the true definition of an IC. Otherwise, they can always change their mind and get you in trouble later. (Like when they find out that independent contractors pay higher taxes because of the self-employment tax.) They could tip off the authorities without realizing it, simply by applying for unemployment benefits. Or your employee could get sick or injured on the job, in which case, the medical folks will write it up as a workers' compensation claim and that's, in fact, your biggest potential liability.

To go forward with the independent contractor status, make payments to the worker with no taxes withheld. Provide him with a Form 1099-MISC at the end of the year (by January 31), but only if the total for the year reaches at least $600.

I recommend that you let your worker know that the position is an employee status position and get set up to withhold taxes from his paychecks and provide him with a W-2 form in January. Check out my Payroll Tax Guide to see what's involved.


Last updated 19 June 2012

Posted on 2011-06-14 00:54:26

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