How do I keep a good paper trail if I pay my in home caregiver in cash?

Oh my,

You are setting yourself up for huge trouble. Do not pay in cash. The caregiver is an employee and the IRS makes that very clear...no exceptions. They will hit you not only with all the withholding you never did (they take it from you not the employee...just a part of the penalty you pay) but, there are a lot of fines too.

Think you won't get caught? All it takes is for the caregiver to be injured and make a claim on workers comp. and why won't they? There is no penality for the worker...only the employer.    Caregiver gets medical paid, medical leave, and no downside for them at all.    Even if they say they won't...you can bet the loss of income and having to pay medical out of their own pocket will make them see that in a new light.  
Or, after you no longer want their service...they go file for unemployment. Again...there is only upside for the caregiver...all the penalties, and fines are leveled only against the employer.

And remember...all the withholding (income tax, Social security, Medicare) have to be paid ONLY by the employer when they get caught.   And you will be caught.

Ah geez....doesn't make a bit of difference how much documentation you are making and keeping...you are just documenting the degree to which you are breaking the law.

Pokersug, make sure you have an employment contract with the caregiver where it stats what are his/her duties, the amount of hours to work each day, and the hourly rate. This will also help since Medicaid come into the picture later down the road.

Here is a sample of such as contract:

https://www.agingcare.com/documents/personal_care_agreement_AgingCare.pdf

Get a receipt book that keeps a carbon copy of your payments. Make the caregiver sign for receipt of payment. Make sure that the receipt includes in the comment or description section that the payment is for care provided for your loved one (listed by name). This also helps protect you if there is any confusion about if the caregiver got paid or not. Try to keep bank statements that show cash withdrawal dates and amounts that line up with the dates on the receipts. Paying with a check makes this step unnecessary but some caregivers prefer cash. Many don't have access to traditional banking systems and have to pay to cash checks. Depending on the amount you pay you may be responsible for paying payroll taxes as they are considered an employee. It may be worthwhile to consult with an accountant.