Does anyone know how to handle private pay caregiver taxes?

Why? So they can raise her homeowners rates or drop her? She needs a payroll company that can also refer her for a workman’s comp policy if required by her state or, if not required, just so she can sleep at night.

A good question for their insurance agent and a good huge umbrella policy attached to homeowners is always an excellent idea no matter WHO you have into or around your home and no matter under what circumstances. Even a friend can fall with disasterous outcome.

There are truly situations where expert help from an attorney, accountant or tax expert is worth the expense. Applying for Medicaid for instance may require expert help. IMO, this is not one of those situations and doing so creates an extra unnecessary potentially expensive wasted step and certainly an unnecessary bill. Anyone can Google the IRS tax rules regarding Nanny’s and home health workers (who, like it or not, are treated the same). Anyone can Google payroll assistance companies that handle the headache of employee payroll and taxes. If you are hiring privately, for substantial regular scheduled hours, the IRS considers your aide an employee (of either the person receiving care or the family member overseeing care) and tax withholding for income, social security, and Medicare needs to be set up. Some states also require workman’s comp insurance- some don’t. The only way to get around this is to hire a home care agency that serves as the aides’ employer and is therefore responsible for those things. You will likely pay more per hour for an agency but they handle the taxes and insurance. Don’t let the promise of a “substitute aide” sway your decision to use an agency. In my experience, that promise rarely works out because most agencies struggle to find a replacement if your scheduled aide calls out. Whether agency or private, sure as the sun rises, there will be times when no one shows up. Have a back up plan. If you hire privately, your hourly cost will likely be substantially lower and all of the wages go directly to the worker, but unless you have experience or a lot of time, you will need to use a payroll service to help you. Care.com is one site that offers both aide searching services and payroll services. There is no way of getting around the IRS rules unless you are only hiring very occasional help. Some people try to call their caregiver an “independent contractor.” Again, Google the rules. You do not need to pay an attorney to tell you that a regularly scheduled private caregiver is an employee under IRS rules. We may not like it - but those are the rules unless changed. Do it right - sleep at night.

Weekly charges are NOT small. The service itself cost at least $100 per payroll, regardless of you if you have one or 20 employees. A care contract (non-employee) would really be best, but a lot of caregivers don’t like them because then they have to pay their own Medicare and social security tax.

Nevertheless, you must deal with this one way or another. If you hire the person as an employee, you should get the accounting firm who does your tax return to do the payroll for them. They would probably charge less than one of the commercial services.

Have you or your Caregiver filed your taxes yet or a previous year? If not caught yet, you will soon be audited and owe FUTA and FICA back taxes plus penalties. The private contractor contract will not hold for your defense. Your attorney's advice is wholly against Fed and most State Nanny Tax Laws. The IRS Pub 926 covers this. If you set the Caregivers hours and/or duties, the Caregiver is considered a Household Employee not a Private Contractor or Self-Employed Worker.