Is there a legal way to pay a part-time employee cash?

I have a small part-time window cleaning business I run out of my home and need part-time help. I have no EIN and I claim my income on personal income tax Schedule C. I would like to not have to take on all the administration and expense of a W2 employee. Is there a legal way to pay a part-time person in cash and give the tax responsibility to that person?

Asked on July 16, 2010 under Employment Labor Law, Wisconsin

Answers:

M.T.G., Member, New York Bar / FreeAdvice Contributing Attorney

Answered 10 years ago | Contributor

You should seek help from a qualified accountant in your area on this matter.  Someone who can take a look at your business and how it works and who knows how the IRS looks at the issue of "employee" status.  It may be possible for you to pay a part-time person as an "Independent Contractor" with what is known as a 1099 rather than a W-2.  But I would NOT pay them is cash.  You need to set up a formal way to pay them with a check.  You will have to issue them a 1099 for tax filing purposes.  You do not take out any taxes or pay any unemployment insurance for 1099 employees.  Their employment must, though, meet certain criteria under the law.  Ask the tax accountant what they are.  If you are providing them with the equipment, etc., you may be delving in to a gray area.  Good luck.


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