On the other side of the same transaction, money earned cleaning houses, minding children, or nursing an elderly client is ordinary wage income — and the single most valuable fact for the worker is that a household employee owes no self-employment tax. You are an employee, not a business; your share of Social Security and Medicare is 7.65%, not the 15.3% a self-employed person pays. Anyone who hands you a Form 1099 for in-home work you perform under their direction has misclassified you, quietly shifting the employer’s half of FICA onto your back.
If that happens, you are not stuck with it. File Form 8919 to report the wages and pay only the employee’s 7.65% share, leaving the IRS to chase the employer for the rest. And whether or not your employer ever issues a W-2 — below the $3,000 threshold they often issue nothing — the income is still taxable and still must be reported. Wages under the threshold escape FICA, not income tax.
Two warnings. Cash “under the table” feels like a raise and costs you later: unreported earnings build no Social Security credits toward your own retirement and disability benefits, and leave you with no verifiable income when you apply for a loan or a mortgage. And the suspended employee-expense deduction (section “Pre-Tax and Above-the-Line Adjustments”) bites here too — a household employee cannot deduct mileage, uniforms, or supplies bought out of pocket, so negotiate reimbursement into the arrangement from the start.