1099 Help and Impact on Part-Time Worker Tax Return

Tax, SDIRAs & Cost Segregation
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1099 Help and Impact on Part-Time Worker Tax Return

John O'Brien
Rental Property Investor · NJ · Member since 2020 · 12 posts · 2 votes

Hi All -
I have a family member doing some handyman/property management work for my portfolio of properties in NJ. For example, he cuts the lawns, fixes things that break along the way (shelving, doors), and will also occasionally show units to prospective new tenants. I pay him hourly and over the course of the year, this adds up to be quite a bit of money (a few thousand), so I believe I will need to issue a 1099-NEC to him. I am looking for some guidance on 2 things:

1) Is the correct route to obtain his W9 and issue a 1099-NEC? Or is there a different set of filings/forms I need to make? I want to make sure I am able to include the payments as expenses in the proper way.

2) How does this affect my family member's tax return? He has a full time desk job with standard W2 income - does this income just get added on top of that and he pays the appropriate taxes based on the tax brackets? Or is there a way for him to pay less tax on the amount? Assume for simplicity that the rest of his return is rather straight forward (basic W2 income, standard deduction, etc.). I want to help advise him on the best way to proceed.

Thanks as always BP community! 

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  • Tom Fidrych
    Member since 2020 · 241 posts · 179 votes
    4y
    Your state laws may dictate whether he is considered an employee or subcontractor.
    For instance, in California the following ABC test is used to make the distinction:

    A) The hirer actually and contractually does not control or direct the
    person in the course of their work; B) The work performed is outside the
    hirer’s normal business; and C) The worker also normally and
    independently performs that work for others. If the hired person meets
    all of those three requirements, they can be treated as an independent
    contractor. As before, the element of control over how persons perform
    their work is key.

    So if he is considered a subcontractor , the 1099 amount will be added to his income. In addition, he will be responsible for the full 15% SS tax. Normally this is split between the employer and employee.
    If he is not considered an employee in NJ, you will need to pay him as an employee and this will involve getting workman's comp insurance and all the other PITA things associated with having employees. However, by doing it all legit, you protect yourself should an unfortunate thing happen to him such as he fall off a ladder will cleaning the gutters and break his neck.
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