Taxes paid to hired caregivers.

When cash is paid under the table, how do you expect to hide sums of money just disappearing form the persons account? This is unwise, When it comes to applying for Medicaid, someone has to point where it went because Medicaid will consider it gifting. The LO may need to go in a nursing home and the government will place a penalty time before payments can start.
You just have to fill out a form of what you paid an employee that corresponds with the checking account. It is the employees responsibility to do their own taxes.

Why would you even consider paying someone under the table?

Would you be willing to work under the table? I wouldn’t. Nor, would I ever pay someone under the table.

No one benefits from this type of arrangement.

From what I understand IRS does not recognize aides as self-employed so no 1099. But, someone on the forum said there was a way to get around that.

1099 is not difficult but, your accountant will have to do them, and the recipients will be required to have a business license to make it legal in the eyes of the irs. Simple and cheap to acquire and gives them added benefits for tax deductions. Anyone not willing to do this should not be allowed in a caregiver position, what are they running from, hiding from or doing wrong? Those are my questions for these cash workers.

I would not encourage anyone to pay under the table, it removes money from the social services all these cash workers want to tap in to, all while getting top dollar pay tax free, not from me. This is the type of thing the irs is going to go after with all the new auditors, it could be very costly getting caught paying someone cash, and you are more likely to be caught because you have to get the cash from somewhere, leaving a trail to be questioned.

Your accountant wasn't helpful in guiding you? You made need to find one that is more diverse. This is simple to get you set up correctly.

Oh, if you require a business license to work for you, it alleviates a lot of your liability from getting sued by an injured cash worker, because a cash worker has no insurances or coverage on your insurance until it is a claim. Trust me on this, it is all well and fine, until it isn't.

Do the math, you can do this legally and pay a great wage to get good, honest caregivers. The labor burden isn't that great to make the consequences worth it. Just my opinion.

The rules around this can vary by each states' labor laws. In my state (MN) a paid caregiver is never considered "contract" or "independent" and is therefore always an employee.

The reality is many people pay their caregivers with cash. But your Mom ever needs Medicaid, she will have to explain where the cash withdrawals have been going, since it will raise red flags during the application process.

Also to consider: if she has caregivers coming into her home regularly, if would be a good idea to have a conversation with her homeowner's insurance agent to see if she needs to increase her liability insurance.

The cash-based caregiver isn't putting money into their own SS fund, so that when the time comes to retire, they will have a smaller monthly income from it. Also not paying into Medicare.

A cash-based caregiver means that a written contract may not be possible. A contract clarifies that person's expected duties and also provides legal protections for both parties when properly written.

This is why I opted to hire through an agency, to avoid the hassle of being an employer. My husband and I were actual employers for decades so I'm happy to not be bothered with the background checks, finding subs, etc.

Paying caregivers in cash seems like a good idea until it isn't.