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What are my tax responsibilities when hiring a home health aide?

16 answers | Last updated: Sep 16, 2014
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Q
A fellow caregiver asked...
I'm hiring a home health aide for my mother, who's battling a recurrence of breast cancer. But I'm confused about what my responsibilities are, in terms of payroll taxes, Social Security taxes, and other benefits. What are the tax considerations when hiring a home health aide?
 

Answers
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Barbara Steinberg is the CEO and founder of BLS Eldercare Financial Solutions, which specializes in helping families pay for long-term care for their...
87% helpful
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Most home health aides are considered employees of the person who hires them. If you hire your mother's aide yourself, then you're responsible for withholding and paying all the relevant employee taxes, including payroll taxes, Social Security taxes, and other mandated withholding in your state, such as unemployment insurance.

If you want to avoid all that red tape, the best way is to hire through a home care agency. The agency is the aide's employer, so it's responsible for following the proper tax rules.

Unfortunately, hiring an aide through an agency will generally cost quite a bit more than if you do the hiring yourself. When you use an agency, you're essentially paying a surcharge for the convenience of someone else doing the background check and filing the necessary paperwork on your behalf.

Because it's less costly, some people decide to hire the home health worker themselves but to pay the aide under the table, without filing any tax or Social Security forms. But they're taking their chances that they won't get caught by the Internal Revenue Service and have to pay penalties and fines.

If you do get caught, don't bother trying to argue that your mother's home health aide is really an independent contractor -- 99.9 percent of the time these workers meet the Internal Revenue Service's definition of employees, so this argument won't fly if you get audited.

 

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28% helpful
Jan52 answered...

For about 2 years my parents required the additional care of a 24/7 aide within the assisted living facility where they live. They can't live without him, yet my dad totally refuses to go with my mom to a nursing home.

I never knew anything about having to take out taxes, SS, etc from the aide's checks. Every check has his name on it...is there to avoid this so the govt. won't catch it?

 

47% helpful
chikbrite answered...

I provide in-home care, assisted living, as an independent agent. Before I begin as the client's caregiver, I give the client my SSNo and let them know they need to provide me a Form 1099 prior to February of the next year. It's a deduction for them if they have earned income, I believe, and it lets the Internal Revenue Service know that what I'm reporting is correct. I provide the client with an invoice at the end of each month, that way we each have a record of what is paid and collected. I never accept cash!

 

25% helpful
irish rose answered...

I'm slightly confused. My Mother has LTC (long-term care insurance) & we just started a claim. I submitted invoices for the past 2 weeks for care provided that the LTC company will pay for. Am I still liable to deduct taxes, SS, Medicare etc. & how are we supposed to know what forms to obtain, fill out etc.? I have no idea what to deduct, if anything. Thank you. Maura in Franklin, MA

 

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29% helpful
An anonymous caregiver answered...

I HIRED THROUGH AGENCY , thinking cost meant security and honesty-BUT MEDS WERE TAKEN. POLICE INFORMED ME THAT MANY CAREGIVERS TAKE THESE POSITIONS TO STEAL VICODIN AND XANAX AND SELL THEM ON THE STREET TO SCHOOL KIDS.

THE AGENCY DENIES ANYTHING, AS PER LAW IN MY STATE, LICENSED CNAs CANNOT ADMINISTER DRUGS.

WHO CAN I TRUST TO BE IN MY LOVED ONE'S HOME WHEN I AM NOT THERE?

YOU ARE THE EMPLOYER WHEN IT HITS A CERTAIN DOLLAR AMOUNT- IF YOU PERSONALLY HIRE: EACH STATE IS DIFFERENT-CHECK WITH YOUR TAX ACCOUNTANT-

 

100% helpful
Jzimmer9 answered...

To all the replies offered above:

  1. When you go through an agency you will pay more for the services however you are paying for far more than the "surcharge for the convenience of someone else doing the background check and filing the necessary paperwork on your behalf." The additional costs are related to the liability insurance, secondary auto insurance, fidelity bonding, and crime bonding we carry as well as doing the background checks and drug testing. We also check references and we only hire individuals we would allow in our own parent's home. That is the bar we set and quite frankly it should be the minimum for every agency.

  2. for our agency ALL cases begin with a free in-home assessment by our full-time Director of Nursing. As the owner, I also go to this visit. This provides the family with the opportunity to meet the essential staff, ask important questions, and discuss costs. The Director of Nursing then prepares a detailed Plan of Care for the client and she then does monthly follow-up visits to insure the care is being properly provided and the client is satisfied with their care and caregivers.

  3. who is responsible for injuries in the home? Do not assume your home owner's policy will cover injuries to your caregiver when injured. Usually they will not cover these costs. Back and shoulder injuries are the most common injuries in homecare. Are you providing medical coverage for these injuries? What if the person can no longer work due to this injury? This is another reason the agency costs more than an individual caregiver. I pay workers comp insurance and unemployment insurance for all my employees.

  4. Most long-term care insurance policies will now pay a benefit for in-home care, however they will require documentation. A reputable agency will be able to provide this documentation.

  5. While we do everything we can to insure we hire only the most reliable and honest individuals to go into our client's homes, there is always a possibility that soemone may do something dishonest. That's why I carry crime bond along with all my other liability insurance. If there is a problem, I will take care of it.

  6. Finally we do not allow any caregiver to dispense medications to a client. All medications must be set-up in med boxes by an LPN,RN,or a family member. If our nurse is setting up the medications we have one more check in the administration process. I can assure you, with proper oversight it is very difficult for a caregiver to steal medications intended for the patient. For more information go to www.brightstarcare.com

 

33% helpful
parentcaregiver answered...

My parents receive medicaid and are on Long Term Care residing in my home only TWO years. I have used a variety of agencies which are managed through the overall Lombardi program. All aides have complained to me about not being paid enough and long commutes. The majority of them boldly asked to be paid cash in addition to what the agency paid.

We are now in search of aide #14. Several were let go for verbal abuse, physical abuse,stealing medication, money, jewelry, even sexual abuse and forgery. The list goes on.

I gave up my career to stay home to protect my mother, since my father's passing. My household income is cut in half and I still have children living at home.

How can something like this ever be fixed?

 

50% helpful
irish rose answered...

Barbara, thanks for the explanation. However, does does one even know or begin to think about 'withholding and paying all the relevant employee taxes, including payroll taxes, Social Security taxes, and other mandated withholding in your state, such as unemployment insurance' as you've stated above? I started with some LTC services through an agency for my Mother 24/7 during the week & then a college nursing student (family friend) on some weekends part-time. I did ask her to check with her tax preparer about taxes but I didn't think I would be responsible? I have used her off & on the past few months on a part-time basis & this never occured to me. For the past 4 months I've had the agency provide 24/7 coverage for the entire week. yes, it's much more expensive as the LTC insurance pays a maximum for the month & the rest is private pay. I pay an additional $5400 each month & funds are diminishing rapidly where I'm considering a reverse mortgage. I don't know whether or not that's a good idea. Has anyone else been faced with this predicament? Any comments/ideas would be appreciated. Thank you, Maura

 

100% helpful
Jzimmer9 answered...

To Parent Caregiver,

There is no easy answer to your situation. Medicare and Medicaid generally do not pay for homecare services. There are exceptions like the nursing home transition program with Medicaid and and the Medicaid waiver programs. These vary by state and have different criteria for eligibility. I am a contract provider with serveral government agencies in my area. The problem is these agencies pay very low reimbursements to the homecare agencies. They are well below what I would bill for a private duty case. I do not reduce the wage I pay my caregivers based on my reimbursement. That is not always the case. There are some homecare agencies that provide the majority of the care for these programs and as a result they often(not always) hire caregivers at a much lower hourly rate. In addition, the cases are often short (2-3 hours). With gas at $4.00/gallon it places an additional burden on the caregiver, especially if they have to drive any distance to get to the client's home.

I would suggest looking into the waiver program in your state. You may qualify to recieve payment for the care you provide. Was your father a Veteran? If he served during a time of war your mother may be eligible for Aid and Attendance benefits which would help cover the costs of private care. Contact your local VA representative or office.

I will pray #14 is the type of caregiver you and your mother deserve.

John

 

Jzimmer9 answered...

To Irish Rose

I would suggest speaking with an attorney or finacial advisor about the reverse mortgage option. Depending on the value of the home it may not be the best option. Medicare generlly does not pay for homecare services, nursing homes, assisted living facilities, or AFC homes. If your mother has to go to a skilled nursing facility, she will have to use up her resourses before she would be eligible for Medicaid. So the question then becomes how long do you expect your mother to be able to remain in your home with care? If your goal is to keep her home as long as possible then spending down her assets is not necessarily a bad thing. Ideally you would want her assets to run out at the same time her health deteriorates to the point where she must go to a skilled facility. She would then be eligible for Medicaid. The house is considered an asset, so at probate the value of the home or the money left from the reverse mortgage may be claimed by Medicaid as part of eligible assets.

 

60% helpful
Bev's Daugther answered...

My mother has been home with us from the nursing home for 2 years now. We use a medicaid waiver program to off set a lot of the costs. As well, we initially used an agency but was extremely unhappy with the quality of staff they were sending. We finally decided to search and interview on our own through the Consumer Directed Care option of the medicaid waiver program (we are able to offer more pay with this option). We use a fiduciary to handle all the payroll stuff (also provided by the program). This has worked well for us. It took a la couple of months in the beginning to find the right person, but we have only two assistants that we have used for the past two years. They are like family. This may not be a common situation. I prayed A LOT asking God to send us a good person in our life to help with my mom.

 

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An anonymous caregiver answered...

we have been caring for our mother for 5 years in our home and full time care. I have used care.com to find a provider. I have been very happy with the 3 different caregivers I have found thru this website. the pay is always a challenge. i had used agency and could not get consistant care and was very unhappy with the providers they sent out, they were late, unfriendly and continually someone new that i had to spend so much time walking thru our expectations. if you can find a good individual provider working thru the pay, tax responsibilities etc is the way to go.

 

67% helpful
CNA2010 answered...

I am a professional Caregiver, I am licensed and bondet, I always tell the familys that I will pay my taxes. I give them a invoice. I have a background check and since I volunteer for a Police department I even had a polygraph ( this is required to volunteer in this position ) I have worked for agencys before they where pretty okay. Not all caregiver are bad, some are. If you tread a caregiver well you will have them for a long time. I worked for my client for almost 6 years ( intepentend) she treated me very well, she includet me in everything,I even traveld with her out of the state, this took so much stress of the family's, in return I did everything I could to make her life as pleasurable as possible. weeks before her passing I stayed up with her at night to make sure she was not alone,( yes at night she was afraid. ) hold her hand assuring her she is okay.I would do anything for my client. so what I am trying to say there are still very good caregivers out there. We always get a bad rap because of a few bad ones. As with any job, you have the good and the bad ones.

 

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An anonymous caregiver answered...

Cna2010 you said it right ! There are some good ones out there and I am one them. I have had quite a few difficult clients in my 19 years of caregiving . The siblings seem to think its always the caregivers fault when something goes wrong . NOT THE CASE KIDS .. you would not have a big turnover in caregivers , if you would let them do they're job. AND be sure to do a background check yourself. Some agencys will send just about anyone off the street to care for your loved one. They want they're percentage. Believe me I know. Been there done that.

 

71% helpful
a caregivers answered...

I,ve been an aide for 20 years in 2 states. #1 for the client: SET UP AN ACCOUNT Online (get help if your not comfortable with computers) with a check paying service for household help, like INTUIT for HOUSEHOLD HELP. They will handle all taxes and paychecks for you! It's only $20 per month. #2 i prefer to work directly for a client and not give a large portion of pay to an agency who often find me on craigslist, YES, there are good, HONEST, EXPERIENCED aids who advertise on this popular site and YES, the agencies often hire us from this site. #3 If you insist on hiring one as an independent contractor, although very few really qualify for it, they will be paying 30.3% in total taxes with almost no writeoffs as a small business normally would have. Some inexperienced aids find this out the hard way at tax time . So anyone who has done it will charge (or certainly SHOULD) charge a much higher rate .

3 Yes, there are dishonest aides, but most are not bad people. #4 in my experience the ones whose children are grown are much more likely to show up everyday and have more availability and flexibility (sorry, but it's true)

Don't be afraid to hire ow n your own.! You can call your local police and ask how to get but a certified aide has had a thorough FBI check to licensed!!! PS sorry if this has a lot of errors...doing it on small cell phone.

 

 
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