[Code of Federal Regulations]
[Title 26, Volume 15]
[Revised as of April 1, 2004]
From the U.S. Government Printing Office via GPO Access
[CITE: 26CFR31.3506-1]

[Page 311-312]
 
                       TITLE 26--INTERNAL REVENUE
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
PART 31_EMPLOYMENT TAXES AND COLLECTION OF INCOME TAX AT SOURCE--Table of Contents
 
 Subpart F_General Provisions Relating to Employment Taxes (Chapter 25, 
                     Internal Revenue Code of 1954)
 
Sec. 31.3506-1  Companion sitting placement services.

    (a) Definitions--(1) Companion sitting placement service. For 
purposes of this section, the term ``companion sitting placement 
service'' means a person (whether or not an individual) engaged

[[Page 312]]

in the trade or business of placing sitters with individuals who wish to 
avail themselves of the sitters' services.
    (2) Sitters. For purposes of this section, the term ``sitters'' 
means individuals who furnish personal attendance, companionship, or 
household care services to children or to individuals who are elderly or 
disabled.
    (b) General rule. For purposes of subtitle C of the Internal Revenue 
Code of 1954 (relating to employment taxes), a companion sitting 
placement service shall not be treated as the employer of its sitters, 
and the sitters shall not be treated as the employees of the placement 
service. However, the rule of the preceding sentence shall apply only if 
the companion sitting placement service neither pays nor receives 
(directly or through an agent) the salary or wages of the sitters, but 
is compensated, if at all, on a fee basis by the sitters or the 
individuals for whom the sitting is performed.
    (c) Individuals deemed self-employed. Any individual who, by reason 
of this section, is deemed not to be the employee of a companion sitting 
placement service shall be deemed to be self-employed for purposes of 
the tax on self-employment income (see sections 1401-1403 and the 
regulations thereunder in Part 1 of this chapter (Income Tax 
Regulations)).
    (d) Scope of rules. The rules of this section operate only to remove 
sitters and companion sitting placement services from the employee-
employer relationship when, under Sec. Sec. 31.3121(d)-1 and 
31.3121(d)-2, that relationship would otherwise exist. Thus, if, under 
Sec. Sec. 31.3121(d)-1 and 31.3121(d)-2, a sitter is considered to be 
the employee of the individual for whom the sitting is performed rather 
than the employee of the companion sitting placement service, this 
section has no effect upon that employee-employer relationship.
    (e) Examples. The provisions of this section may be illustrated by 
the following examples:

    Example 1. X is an agency that places babysitters with individuals 
who desire babysitting services. X furnishes all the sitters with an 
instruction manual regarding their conduct and appearance, requires them 
to file semimonthly reports, and determines the total fee to be charged 
the individual for whom the sitting is performed. Individuals who need a 
babysitter contact the agency, are informed of the charges, and, if 
agreement is reached, a sitter is sent to perform the services. The 
sitter collects the entire amount of the charges and remits a percentage 
to X as a fee for the placement. X is a companion sitting placement 
service within the meaning of paragraph (a)(1) of this section. 
Therefore, since the agency does not actually pay or receive the wages 
of the sitters, X is not treated as the employer of the sitters for 
purposes of this subtitle. The sitters are deemed to be self-employed 
for the purpose of the tax imposed by section 1401.
    Example 2. Assume the same facts as in example 1, except that the 
individual for whom the sitting is performed pays to X the entire amount 
of the charges. X retains a percentage and pays the difference to the 
sitter. Since X actually receives and pays the wages of the sitters, X 
is the employer of the sitters.
    Example 3. As a service to the community a neighborhood association 
maintains a list of individuals who are available to babysit. Parents in 
need of a sitter contact the association and are provided with a list of 
names and telephone numbers. The association charges no fee for the 
service and takes no action other than compiling the list of sitters and 
making it available to members of the community. Issues such as hours of 
work, amount of payment, and the method by which the services are 
performed are all resolved between the sitter and parent. A, a parent, 
used the list to hire B to sit for A's child. B performs the services 
four days a week in A's home and follows specific instructions given by 
A. Under Sec. 31.3121(d)-1, B is the employee of A rather than the 
employee of the neighborhood association. Consequently, this section 
does not apply and B remains the employee of A.

    (f) Effective date. This section shall apply to remuneration 
received after December 31, 1974.

(Secs. 3506 and 7805 of the Internal Revenue Code of 1954; 91 Stat. 1356 
(26 U.S.C. 3506); 68A Stat. 917 (26 U.S.C. 7805))

[T.D. 7691, 45 FR 24129, Apr. 9, 1980]