Yes, it is a business. And it’s a legal business, for a reason. For one thing, the owners are typically sole proprietors, as defined by chapter 651 of the Tax Code. As in most small-business tax issues, the bottom line is what the owner wants: a low tax rate to attract clients, and a more favorable tax treatment on revenue derived from those clients. (See this handy chart for more details. This article was originally published Feb. 9).
That’s not to say that you should ignore the importance of business taxes when hiring a pet sitter, nor must you let the pet sitter off the hook without fault. (After all, a pet in heat is unlikely to be more than a couple of feet from your house.) Rather, the owner’s tax obligations must be closely monitored.
If you’re like most Americans, your pet is often the only family member who’s on the payroll. The tax code does not have a provision to compensate employers for the cost of taking care of a pet. In fact, it’s illegal to do so. As a result, pet sitters typically have tax liabilities only if they’re employees. And while most Americans aren’t covered by any of these tax laws (including medical/prescription costs) and aren’t necessarily aware of them, many employers — particularly small businesses — are concerned about how their employees’ dependents are paying their taxes.
But if, like most Americans, you’re also interested in pet tax issues — because it would be a shame to not be able to offer an extra service for your loyal friend — now is the time to learn about them. This article will provide a quick look at the current situation and offer some tips on how you might address this problem.
What Are the Dog’s and Cat’s Tax Liabilities?
In general, the owner of the pet must be willing to pay taxes on income derived from a business the owner conducts, including the fee charged for the service. In the case of services performed as a pet sitter, however, there is no requirement that the owner be an employee, so there is no tax liability for the business.
What tax law does apply to pet sitters? There are many. The U.S. Department of the Treasury’s Revenue Procedure 41-6(a)(6)(B) explains what happens to a pet owner’s tax liability based on his business and the services performed while the property is in the owner’s care (the owner is