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HOUSEHOLD HELP : Nail Down Laws, Taxes on Workers

July 10, 1993|JOHN O'DELL | TIMES STAFF WRITER

It's summer, and for many Orange County households, prime time for hiring someone to help out with home and yard chores or special projects.

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But it's also the Summer of '93, which follows hard on the heels of the miseries that two of President Clinton's cabinet nominees--unsuccessful nominees--went through because they had not paid attention to the rules when they hired household help.

As America discovered, the law is the law, from the humblest condo to the plushest manse on the hill.

At its uncompromising best (or worst, depending on which side of the paycheck you find yourself) the law says that a homeowner who hires someone to help out often must: Report that employment to the federal and state governments; pay the employers' share of the worker's Social Security and Medicare insurance premium payments; give the employee a federal W-2 form to fill out and ensure that he or she is covered by state worker's compensation insurance.

But, and there almost always is a "but" or two where the law is concerned, you don't always have to report and pay and insure.

For the Record
Los Angeles Times Saturday July 17, 1993 Orange County Edition Home Design Part N Page 3 Column 4 View Desk 2 inches; 48 words Type of Material: Correction
Household help--Homeowners and renters do not have to report to the IRS the fees paid to independent contractors for work around the home. The IRS requires only businesses to file a Form 1099 report of their payments to independent contractors who receive in excess of $600 in a calendar year. The rule was erroneously reported in a July 10 article.

The rules apply only when you have hired an employee because the law makes a distinction between someone who works directly for you and is under your supervision, and independent contractors--such as a plumber--who tell you what a job will cost, show up at their convenience and work at their own pace.

Of course, the whole thing is a lot more complex than that--the rules and their explanations fill thousands of pages in texts about labor and workers' compensation law. Here, though, are some of the basics:

WHO IS AN EMPLOYEE?

The basic rule of thumb is control, says H. Neal Wells IV, co-chairman of the Orange County Bar Assn.'s workers' compensation section and an attorney with the law offices of Egger & Hallett in Anaheim Hills.

"The more that you, as the homeowner, control the worker, the more that worker is your employee."

Workers who don't qualify as employees are independent contractors.

State and federal laws define independent contractors as workers who have their own business or trade licenses (or should have); provide their own specialized tools and skills; have the right to hire and fire their own help and can dictate, in conjunction with the homeowner, the time they do the work and the manner in which it is done.

Want someone to come in and build a patio cover?

If you look in the phone book and call Pete's Patios and Pete tells you when he will arrive and how much you are going to pay him; brings his own tools and gives you his business license and workers' comp policy numbers so you can call and make sure he really has coverage, then Pete is an independent contractor.

But if your neighbor tells you about a handyman friend of his who does great work and you call and offer him $200 to build a patio cover and you buy the lumber and tell him what weekend to show up and provide some or all of the tools for the job, then he's your employee.

Does Junior Crabtree, the high school kid down the block, mow your lawns? Figure he or she is your employee. Same with baby-sitters.

One sticky area is determining the status of maids and other household cleaning help, Wells said.

Obviously, if Flora the floor cleaner or Walter the wall washer are hired the same way you hired the handyman, they are your employees.

But what if you call Mortimer's Maids? Mort says sure, he can send someone out, every other Thursday from 11 a.m. to 4 p.m. for $75 a day.

Mort seems to fit the definition of an independent contractor, but Wells says that if he doesn't have workers' comp insurance, or if the homeowner pays the maid directly, the cleaner has a claim against the homeowner's insurance if injured on the job.

In California, homeowner insurance policies are required to provide workers' compensation coverage for household employees--defined by state law as someone who, in a 90-day period, works for a homeowner, at the home, at least 52 hours or is paid at least $100 and is not an immediate family member.

For federal and state withholding and employment reporting purposes, however, the minimum requirements are tighter.

"If you have a household employee, and you pay that person more than $50 in a three-month period, then you are required to file a federal Form 942 with the IRS" alerting the government to the employer-employee relationship, said Greg Lewis, a certified public accountant and partner in the Santa Ana accounting firm Elliott, Lewis, Lieber & Stumpf Inc.

While the hours and pay are less than under workers' compensation's definition of a household employee, "the issue is still control," Lewis said.

"The common law test is to determine who controls the manner and means of how and when the work gets done," he said.

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