The service of taking care of a pet that is a companion animal (such as a cat) or a companion animal-human animal (such as a dog), or a wild animal (such as a coyote, dog, or raccoon) is a taxable service that entitles you to receive a tax credit. The service of taking care of a living animal other than a companion animal of a companion animal may not be provided. However, the service of caring for a living animal on your property in a non-temporary facility (such as a motel, boarding kennel, or animal shelter) is a taxable service. For details, see Pub. 551 for more on Taxable Service as provided by the Internal Revenue Code.
When paying cash for the service provided by a business on a tenant’s property, the business does not have to withhold federal income taxes when it pays for services. (Although the law does not permit business owners to pay taxes by check or money order, you may be able to do this when the business is owned by a corporation or partnership.)
How Does a Property Owner Manage the Service?
It is common for property owners to contract with the individual performing the service to manage the services. Typically, these contracts are for a period of time and, in the case of service provided by a business in a home, specify how much the business is responsible for making the contract payment. In some situations, a property owner may have a financial partner who may act as a custodian of the property. If there is an agreement to manage the property, the property owner typically pays the management contract, taxes, or charges for services into one or more accounts, and then pays to the individual the balance in the accounts. Generally, the individual who performs the services and the property owner will work together to determine and record the property owner’s account balances.
For example, suppose Joe works from home one evening. Joe is paid a flat cash fee of $20 to do his best to make the home that night’s dinner ready. Joe then records into an open deposit account. When he leaves the property, his account balance is $20. The next day, Joe deposits the remaining $18 in his account. The next day, Joe leaves the property for the last time. Each day Joe records in the account the $18 balance at the end of the day he left the property. Over a course of several years, Joe records the funds in his account into different cash, deposit, and