“By default, the IRS will assume that it is [taxable], and certainly it will capture so-called gig workers who were sliding under the transaction limits and receiving income that may not have been reported on their tax return,” he said.
“It’s likely beneficial for workers to be paid on the books, both for employers and workers,” FitzPatrick added. “For example, workers may pay into Social Security.”
Payroll companies may charge fees up to $200 per month, “potentially more if there is a substantially large payroll,” he said. “This cost typically includes paycheck processing, online access for employers and employees, direct deposit and basic tax filing.”
Long-time employers of domestic help should be concerned that the IRS will begin scrutinizing workers who get what Eyler termed “a large pop” of 1099-K income and begin investigating prior years’ unreported taxable income.
“The best way a wealthy client can protect themselves is to pay domestic help through a payroll processing company ... and treat them like employees,” he said. “And if your client does receive the 1099-K ... keep records to be able to justify what portion of the reported income is in fact taxable.”