I have to ask, am I the only person who hires help that reports their income? I had 2 new people in their teens this weekend, well one was the mother of one of the teens that was upset that I wanted here to fill out a W9 and report the income. I understand that no one likes paying taxes, and I never pay more than I need to but is it safe to assume that if you are getting paid that the right thing to do is report it? Is it unreasonable to expect that people actually claim money they earn as income?
1 Like
What kind of “help” are you referring to? I don’t think the average home or farm owner who hires someone to muck 3 stalls or has a kid mow their lawn expects them to report taxes on that income.
If you are operating a business, that’s a different story. And yes, there is an expectation that you are operating a legitimate business as there could be audit implications for your business.
I honestly have no idea what I would do with a W9 if someone filled one out to work for me. I don’t own a business, just an average homeowner who has paid cash for lawn mowing, baby sitting, stall cleaning, etc.
8 Likes
I paid the Amish kiddos next door to paint a fence with me (ages 11, 9, 8). Great kids, worked for two hours at a time (break in between). Each had his/her own brush and small can of paint that I would refill when empty. I worked with them and their house overlooks the fence so mom could look out and see them (if she wasn’t busy with the other 5). Paid them in cash --same amount for each.
At dinner with a former social worker, I said how much I admired their work ethic --they asked me if they could help and kept at it for two hours at a time over six different days. She told me I was violating child labor laws. I am going to keep hiring the little people. They are nice kids.
18 Likes
At the end of the year you would use the W9 info to send them a 1099 so they could then use that form to include in their taxes so they paid taxes on the income stated on the form.
However, if they make less than $600 in the year working for you, they’re not obligated to report the income.
But to answer the OP’s question. Teenage kids that work a few days a week feeding or cleaning stalls I pay cash and do not give them a 1099.
2 Likes
So you would claim this employee as a consultant/independent contractor?
Not sure I think that is appropriate if they are acting as an employee.
If an employer expects a worker to pay taxes, they should also be expected to act as an employer. That means paying social security and workers comp taxes etc
6 Likes
If you are operating as a business, with all that implies, then you are dotting all your i’s and crossing all your t’s by having workers fill out whatever form is appropriate to your situation - in this case the 1099. What that person does with it at the end of the year is up to them. Your involvement ends as you are not an employer in the traditional sense (paying into SS, etc).
1 Like
Well…step back.
Claiming an employee as an independent contractor is improper. So I would not agree that “in this case a W9/1099” is appropriate.
There is a checklist to help determine if someone is an employee or independent contractor. Someone hired to do routine farm work on your farm is definitely not an independent contractor.
Expecting them to file taxes but failing to protect them as an employee is hypocritical.
5 Likes
if OP’s operation is a Business, failure to file 1099s has potential .consequences
If your business fails to issue a Form 1099-NEC or Form 1099-MISC by the deadline, the penalty varies from $50 to $280 per form (tax year 2022), depending on how long past the deadline the business issues the form.
(removed web link as it was just annoying link to TurboTax )
I work as an independent consultant to several businesses, I report all income even if a company is charged less than $600 within a year. If there is no 1099 I still report the income. The IRS has never asked to review any of my filing yet.
1 Like
Mom could end up like my brother.
He had a series of jobs - some paying pretty well - that paid him cash “under the table”.
A couple jobs did report his income - lucky they did!
Because, when he drew his SSI it came to a mere $600/mo.
So at 71, he’s still working.
If Mom has another job, reporting what you pay should hardly send her into a higher bracket.
If she doesn’t, you’re still doing what you need to protect your business.
Assuming you do pay into WC, MCR & SSI.
I was selected at random to have an IRS Taxpayer Compliance Management Program Audit some years ago. They got me on this one and I had to pay taxes, social security contributions and penalties, and they followed up by contacting the folks I had hired to do occasional labor about them not reporting this income themselves.
Needless to say, the only happy person involved was the IRS auditor.
The IRS provides a form SS-8 if you search you will also see it called the IRS 20 Factor Test – Independent Contractor or Employee?, that allows you determine if a person is an employee or and Independent contractor, I use this to determine a persons description, unfortunately there is room for subjectivity. But those are the guidelines I use.
My family had domestic help during my childhood (and beyond). My parents paid all FICA taxes (SS and Medicare), and well enough to cover the workers’ share. They didn’t pay “under the table.”
The huge underground economy of non-taxpayers causes taxes to be higher for all the wage-earners whose incomes are reported (including service workers who may be making no more than, or less than, under the table workers). Very unfair.
1 Like
The first question is whether they are really “independent contractors” (they fill out a W-9, you send then a 1099 at the end of the year) or “employees” (they fill out a W-4 and you send them a W-2 at the end of the year, and you are also responsible for paying the employer’s share of social security, and deducting the employees share of social security, etc.)
In both cases the income is reported to the IRS. It is up to the employee/contractor to pay their income taxes, if needed.
It is my understanding (I am not a tax expert by any means, but I deal with W-9s and 1099 as an Eventing TD) that you do not need a W-9 and 1099 if the amount is less than $600.
It is also my understanding that the employee/contractor may not owe income taxes unless their income is over a certain threshold.
I understand the difference between w9, and w2 income. I just always have an employee fill out a w2 or an independent contractor fill out a w9 before they actually get paid, preferably before they start work so they understand my expectations up front, the one person had to wait for her mom to pick her up at the end of the day, who was upset, the second person who was just incensed that I would have think of reporting income. I guess I figure the default is being honest and reporting all income, I am not a tax expert either, but my rough understanding is that unless you are making $12,900 a year, which no of either of these people are likely to, then it has no impact on you whatsoever, you don’t even need to file. But there are penalties for me not reporting it.
As far as I know, you are perfectly capable of/allowed to file a 1099-misc even if the “vendor” has not filed a W9. So, you being able to do your taxes correctly is not reliant on someone else’s lack of desire to do so. And it’s really none of your business if they don’t want to, and of course you’re perfectly allowed to not hire them.
There’s privacy considerations other than “not wanting to pay taxes” for a parent to be opposed to giving you a W9. Since it’s a teenager, I’m assuming they don’t have a business registered for an EIN, so they’ll have to provide the kid’s social security number. Well, there’s a whole big difference in providing such information to a large corporation like, say, Arby’s, with a whole HR and legal department and securities in place, versus giving it to a random local farm owner who may or not have done their own proper business registrations and may or may not actually follow employment and other laws.
Agreed with S1969 - it’s really doubtful these teens you’re trying to “hire” actually qualify as independent contractors. Very few barn personelle do.
Microsoft Word - Independent Contractor determination.doc (oregon.gov)
Crazy that people think that the Joe and Jane Schmoes making $15k a year in cash are “marking taxes higher” and not the billionaire and trillionaire humans and corporations not paying taxes. 
3 Likes
It’s everyone, of course including the wealthy. It all adds up.
My point is that the person making not very much in a service job (for example), with a W-2, is paying whatever they owe, due to withholding, while someone getting paid under the table is not. That’s not fair, IMO, to the former.
I’m not sure about the tax legality or responsibility, but I think culturally it is normal to obtain that information for a regular employee (i.e. someone who is coming in to work for you on a weekly or monthly basis). But if you are being paid to come in once or twice to do odd jobs, or maybe the occasional farm sitting gig, then I would not expect someone to ask for me to fill out a W9 or W4 and would probably balk at that request. Especially as a teenager. So far I have worked in multiple barns as a barn hand/manager, and I have only had 1 get my info and properly withhold taxes.
1 Like
Occasionally hiring someone to operate a shovel for a day, or to braid manes and paying cash is something that I still do.
As I said up-thread, if you pay by check or electronically, there is a trail. You may think that the odds are in your favor, as I did. But the IRS Taxpayer Compliance Management Program audit is random (supposedly) and extremely thorough. Mine took five days, in person, transporting all my records to the IRS office. The auditor would end up one day with a list of all the documents I needed to bring in the following day. This is the type of audit that FBI Director Comey and Assistant Director McCabe were also “randomly” picked for.
FYI, every line on your tax forms must have supporting documents. I had been filing married filing jointly for over 40 years, but had to produce a marriage certificate. Same with birth certificates for dependents. It makes sense, but still, And I was asked about every cancelled check to an individual - what the payment was for and information about the recipient. I could go on, but It is way beyond thorough.
CPA chiming in…
This is an excellent business practice regardless of the age of your contractor or person.
You will get a notice that you filed a 1099 without an EIN/SSN. Once every few years? Sure it passes. But multiple people year after year is a big red flag. You also must paper file the 1099’s over efiling when you don’t have an EIN/SSN, which anything paper means a year’s wait to be processed.
But if you are audited, they are able to disqualify your “contractor” payments as a non-qualified business expense if you did not send a 1099. This will increase your tax liability.
They probably put you on payroll and withheld income, medicare and SS tax. If they did not withhold taxes, then you should have gotten a 1099 if it was over $600 for the year. But there are many reasons why people don’t send 1099’s, mainly that it is easier NOT to.
I tell all my equine clients to get a W9, especially for mucking and groom positions Edit: At a minimum. Feeding and mucking fall under a W2 employee in my eyes, and I advise them as such. I tell them “that your CPA requires it”. As someone mentioned up thread, you can certainly not employ anyone that prohibits you from conducting your business within the guidelines of law and tax code.
As for independent contractors versus employees? This is an argument I have every year with several clients. Many of the positions that are debated are mucking/feeding type positions. Don’t get me started on “but it’s a farm! I should have ag exempt status”…
Stay the course OP…you are correct that just because you send a 1099, that the payee may not need to file a return. But that is nothing you would know or need to police.
ETA: Horse farms are notoriously on the IRS radar. They see them as ways that people take large losses against other income.
4 Likes
So how would a person hired to clean stalls qualify as an independent consultant? I don’t see how they would. I’m curious why you would tell your clients to obtain a W9 rather than W2 and put them on payroll.
We engage a lot of consultants at my job. That’s one of the most policed policies because apparently the IRS looks for employers misclassifying employees. (We received federal funds also, though so have an A-133 audit every year so maybe we’re more careful.)
1 Like
