I am trying to help an elderly friend of mine find out if the way she has been paying for her live in home care is legal.
Each week she simply gives the caregiver a check for cash and does nothing more....
Is it legal to do this withoug taking out federal taxes, ss taxes, state taxes etc???
She has become very worried about this and I would like to ease her mind if possible.
BTW - She is a Michigan resident.
Any advice would be greatly appreciated.
I work as a contractor and I am paid by my employer with a check. Taxes are my responsibility. If her caregiver is working on a contract type basis, then this may well be fine. You may wish to speak to a financial consultant for more information. :)
I really don't know all the rules here, but I think your friend has cause for being concerned (especially if she wants to work in the Obama administration).
There are some tests that you have to meet to be considered a contractor and I think that in-home caregivers don't meet these standards (the one I remember is that they use their own equipment).
If I'm wrong about that, then at a minimum she needs to do some filings of wages paid to her contractor (usually she'll need a social security or EIN for the contractor) and I think the filings would be yearly.
However, I think that really she should be paying them as a household employee, deducting taxes and reporting their wages to the IRS. There are thresholds here too - I don't know how often your friend uses the caregiver.
I think a tax accountant could clear up the situation. There are also a number of online payroll services that try to make this fairly easy to do.
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