Employee vs. Independent Contractor: How to Tell the Difference at Home
If you decide when, where, and how the work gets done in your home — which is true for nearly every nanny, housekeeper, or caregiver — the IRS considers that person your employee, not an independent contractor. Handing them a 1099 instead of a W-2 doesn't change that; it just means the taxes weren't handled correctly.
What actually determines employee vs. contractor
The IRS looks at control, not what you call the arrangement. The core question: do you control how the work gets done, or just what result you want?
- You set the schedule, provide the supplies (crib, cleaning products, car seat), and give ongoing direction → employee
- They run their own independent business, set their own hours across multiple unrelated clients, and you're just paying for a finished result → possibly a contractor
For a nanny who works your family's schedule in your home, or a housekeeper who cleans on your timeline with your supplies, the answer is almost always employee — even if you pay them a flat rate, even if they also babysit for other families, and even if they'd prefer to be a contractor.
Why families reach for 1099s anyway
Usually to avoid the paperwork: no EIN, no Schedule H, no employer share of FICA. It's understandable, but it's also the single most common household payroll mistake — and it doesn't remove the requirements, it just shifts the tax bill onto the worker and leaves you exposed if it's discovered later.
What a true independent contractor looks like
A genuine household contractor relationship is the exception, not the rule. It usually looks like:
- A company sends different cleaners each visit, sets the pricing, and handles their own payroll
- A landscaping business you call occasionally, with their own equipment, insurance, and other clients
- A one-time repair person you'd find in a phone book, not someone with a regular weekly presence in your home
A person who shows up at the same time every week to care for your kids or clean your house on your schedule isn't this.
What to do if you've already been issuing 1099s
Stop, and switch to treating them as an employee going forward. Sadie's setup walks you through it in about a minute. For the prior period, a tax professional can help you correct it — see our year-end payroll guide for what typically needs fixing.
Frequently asked questions
Can my nanny choose to be a contractor if she wants to?
No — classification follows the actual working relationship, not either party's preference. The IRS makes the determination based on control, not a signed agreement.
Is a nanny-share agency different?
If the agency employs the nanny and assigns them to you, the agency may be the employer. If you're hiring and directing the nanny directly — even if an agency helped you find them — you're usually still the employer.
Related guides
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Set them up the right way, from day one.
Sadie's private invite link lets your employee add their own tax details — no 1099, no guesswork, and you never see their Social Security number.
This guide is general information, not tax or legal advice. Rules vary by state and change over time — confirm anything specific to your situation with a licensed professional or your state's labor department.