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person chef paid 1099 or w2?

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  • One Wet Bandit One Wet Bandit 
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    Status: Physician
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    Joined: 10/14/2017

    Hi,

    We’re considering hiring one of those personal chefs who come to your house once a week and cook a bunch of meals for the week (and shop for the ingredients).  Looking online these tend to run about 250/week of use + cost of groceries.  Ignoring the financial cost of this (12k/yr, which is well within our budget while still allowing for 20% gross saved in retirement/taxable accounts), if I hire one do I then have to supply a 1099 or a w2?  I’d guess a 1099 since the chef would only be coming once a week, and the rest of the time (including that day) will be doing the same business for other families.  While we would agree upon the service being done the same day/time each week for simplicity sake, what will I be responsible for in regards to the chef’s taxes?

    thanks

    #174504 Reply
    Hank Hank 
    Moderator
    Status: Attorney
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    Joined: 03/27/2017

    A personal chef would be a domestic employee.  You’re looking at a Schedule H.

    https://www.irs.gov/forms-pubs/about-schedule-h-form-1040

    https://www.irs.gov/taxtopics/tc756

     

    #174511 Reply
    Liked by MPMD
    jfoxcpacfp jfoxcpacfp 
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    Status: Financial Advisor, Accountant, Small Business Owner
    Posts: 8134
    Joined: 01/09/2016

    This may fall under the category of household employee. However, if the personal chef brings their own kitchen tools, handles other clients, and controls his/her own schedule, you are contracting with a small business owner and you would not issue anything to him/her unless you are hiring the person in your own business capacity. Kind of a squishy topic because the chef will probably work for others but use your tools. Check with the service and find out more about the arrangement. Will they fit you into their schedule or will you control their activities?

    Johanna Fox Turner, CPA, CFP, Fox Wealth Mgmt & Fox CPAs ~
    http://www.fox-cpas.com/for-doctors-only ~ [email protected]

    #174513 Reply
    Liked by jz, spiritrider
    Avatar spiritrider 
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    Status: Small Business Owner
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    Joined: 02/01/2016
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    Household employees routinely provide services for more than one household.  Even if the Chef brings some of their own cooking implements, the majority of the cooking resources will be yours.

    I believe the key criteria will be if they “prepare” the weekly meals on their schedule at their place of business and deliver them to you on one night or they prepare all the meals on your schedule at your house.

    My opinion is the former is an IC and the latter is a household employee.

    The IRS uses Behavioral Control, Financial Control and Relationship of the Parties to determine the proper worker classification.

    #174603 Reply
    Hank Hank 
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    Status: Attorney
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    Joined: 03/27/2017

    Does the chef decide what evenings to show up, or do you set the schedule?
    I suspect that this is a part time household employee. Then again, after the Dynamex case in California, oral surgeons and endodontists are being treated as W-2 employees instead of 1099 contractors when they work a day or two in someone else’s general dentistry practice. Madness. Why can’t folks with more specialized skills be paid as 1099s when they elect to freelance?

    #174616 Reply
    Avatar adventure 
    Participant
    Status: Spouse
    Posts: 1183
    Joined: 10/24/2016

    Have you tried this out? I’m eager to hear how this works out!!

    #174632 Reply
    One Wet Bandit One Wet Bandit 
    Participant
    Status: Physician
    Posts: 47
    Joined: 10/14/2017

    Havent hired the chef yet, we were thinking for 2019- but the chef would tell us their availability and match it with ours.  He/She would come to our apt to cook the meals and then store them in our fridge using our supplies with instructions on how to reheat them for us.  So they would only come 1/week and prep meals meant to last for a few days. So the chef would be using our utensils/oven, but they would inevitably control the schedule. I cant tell them to come at 10 pm on a monday and expect them to do so. The chef would have other clients and really be the person in charge of schedule, BUT would use our utensils/groceries/oven.

    #174672 Reply
    jfoxcpacfp jfoxcpacfp 
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    Status: Financial Advisor, Accountant, Small Business Owner
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    Havent hired the chef yet, we were thinking for 2019- but the chef would tell us their availability and match it with ours.  He/She would come to our apt to cook the meals and then store them in our fridge using our supplies with instructions on how to reheat them for us.  So they would only come 1/week and prep meals meant to last for a few days. So the chef would be using our utensils/oven, but they would inevitably control the schedule. I cant tell them to come at 10 pm on a monday and expect them to do so. The chef would have other clients and really be the person in charge of schedule, BUT would use our utensils/groceries/oven.

    Click to expand…

    I don’t believe they would be considered household employees, then. Ask them if that is how their other clients handle their pay, also. The lady who cleans our house cleans several others and our office. She uses our vacuum cleaner and I stay stocked with cleaning supplies, but that is her deal with other clients, too. We give her no tax forms personally but the business gives her a 1099.

    Johanna Fox Turner, CPA, CFP, Fox Wealth Mgmt & Fox CPAs ~
    http://www.fox-cpas.com/for-doctors-only ~ [email protected]

    #174682 Reply
    One Wet Bandit One Wet Bandit 
    Participant
    Status: Physician
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    Joined: 10/14/2017

    Just read this from the link hank provided:  The IRS states that a household worker “is your employee if you can control not only what work is done, but how it is done. ”  I cant say that I am telling the chef how to prep or cook the meals.  They come up with the menu that I would approve but I have no control over how they cook it.  Im guessing this is similar to using a molly maids service (Like Johanna’s example) vs using a maid that you specifically instruct how to clean your house (use x cleaner for the floor, y for the dresser, etc)?  It seems like a very gray area that could’ve been better explained by the IRS but oh well.

    #174686 Reply
    Avatar spiritrider 
    Participant
    Status: Small Business Owner
    Posts: 1907
    Joined: 02/01/2016

    With a household situation vs. a business one, the presumption is a little more towards an employee classification. These specific circumstances also lean that way.

    However, my non-professional opinion is that a written contract of limited duration (<= 1 year), with strong behavioral control by the Independent Contractor and flat fee payments vs. hourly rate would be sufficient to classify as an IC.

    See the IRS guidance Understanding Employee vs. Contractor Designation

    The Behavioral Control, Financial Control and Relationship of the Parties is not all or nothing:

    • Behavioral Control: The contract should be able to solidly meet all the bullets to define IC control.
    • Financial Control: You are not going to be able to meet the first three bullets, but should be able to solidly meet the last two.
    • Relationship of the Parties: A written contract with limited duration should meet the IC criteria.

    I have had several IC contracts approved by Fortune 500 compliance departments and third party W2/IC compliance firms with similar Behavioral Control, Financial Control and Relationship of the Parties. Most Locums are similarly structured, although some administrators are getting skittish.

    Note: At some point (???), you are not going to be able to simply renew the contract. You are going to need to contract with a different Chef.

    P.S. There is a big difference between a company with multiple employees providing services (Molly Maids) and an individual Chef. The former is clearly a contracting of services. If this is a company with multiple Chefs, this discussion is not necessary.

    #174689 Reply
    q-school q-school 
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    Status: Physician
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    Joined: 05/07/2017

    more importantly, how does one find this type of person.

     

     

    #174728 Reply
    Avatar Vesalius 
    Participant
    Status: Physician
    Posts: 16
    Joined: 11/11/2018

    We have a personal chef/housekeeper/personal assistant, but this is a full-time live-in position, so therefore clearly a domestic employee.

    #174790 Reply
    Liked by jfoxcpacfp
    One Wet Bandit One Wet Bandit 
    Participant
    Status: Physician
    Posts: 47
    Joined: 10/14/2017

    more importantly, how does one find this type of person.

     

     

    Click to expand…

    A work colleague actually brought it up, then using the internet.  I haven’t found a company with multiple chefs yet but I will keep searching 😉

     

    #175078 Reply
    jfoxcpacfp jfoxcpacfp 
    Moderator
    Status: Financial Advisor, Accountant, Small Business Owner
    Posts: 8134
    Joined: 01/09/2016

    We have a personal chef/housekeeper/personal assistant, but this is a full-time live-in position, so therefore clearly a domestic employee.

    Click to expand…

    Please allow me to be the first to admit that I am green with envy.

    Johanna Fox Turner, CPA, CFP, Fox Wealth Mgmt & Fox CPAs ~
    http://www.fox-cpas.com/for-doctors-only ~ [email protected]

    #175082 Reply

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