Risks of Hiring Caregivers Under the Table

Why It Can Be Dangerous to Hire Caregivers Under the Table
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There's no question that when you peruse the ads for an in-home caregiver on Craigslist or other online sites, or you discuss the costs of hiring an aide with a geriatric care manager, the wages charged by independent caregivers are lower. And certainly paying an hourly wage without taking out taxes -- known as paying "under the table" -- saves you even more money while allowing your caregiver to take home a bigger paycheck. But unfortunately, it's not as simple as that, because there are numerous risks and hidden costs involved in paying a caregiver under the table. Here are the dangers to consider before entering into an under-the-table arrangement.

1. You're breaking the law.
Sorry, but it's true, and it's best to face the fact up front. When you hire an in-home caregiver, the IRS considers that person your employee if you pay her more than $1,800 in a calendar year. This means the IRS holds you responsible for withholding and paying taxes, which include income tax, Social Security, Medicare, and other state and federal taxes and benefits. Some families try to get around this by labeling a caregiver a "contractor," in which case you file a W-9 recording the annual total of your caregiver's wages, and she's then responsible for paying taxes. However, few caregiver relationships meet the IRS's definition of a contractor, and the government is cracking down on enforcing this issue. If you choose to go completely under the table, you and the caregiver together are defrauding the government of taxes and benefits. If you're considering going this route, it's a good idea to talk to an accountant or lawyer to learn about the legal and financial rules about hiring in-home help and the possible consequences of ignoring them.

2. You could pay more down the line.
As an employer, you were legally required to pay taxes for your employee. This means that if you get caught by the IRS, you'll be responsible for paying back taxes, including interest and penalties. These taxes and penalties accrue each year, so if you hire a caregiver for several years, or if you get caught years later, or both, the penalties can be very steep. You might think there's little chance of getting caught, but you'd be wrong. You can get caught during an audit of your taxes or as a result of a caregiver's future actions, such as if she seeks unemployment compensation or in some other way reports the job.

3. An under-the-table caregiver is harder to verify.
Home-care agencies and most registries conduct background checks and use verification services to make sure caregivers don't have a criminal history or any other issues you should know about. Often registries and agencies also check driving records and make sure caregivers have valid licenses. Many professional caregivers (who typically ask to be paid over the table) are also licensed and bonded, giving you the security of knowing that they've undergone professional training and that these checks have been performed. If you hire someone on your own, you'll need to do all this yourself, and it's unlikely the results will be as satisfying. Of course you'll ask for and check references, but the less legal your arrangement, the greater the chance that your caregiver candidate could be padding her resume or faking references.

SEE ALSO: Find In-Home Care Help Near You

4. You're not protected from disability claims.
Many professional caregivers are bonded and carry disability insurance in case of injury. Under-the-table caregivers are unlikely to come with these safeguards. If your caregiver is not bonded and insured, you could be liable if she gets hurt or disabled from an injury or accident she suffers on the job. By hiring under the table, you have little protection if she chooses to seek damages. Yes, it's unlikely, since the fact that she agreed to an under-the-table agreement may prevent her from coming forward, but it has happened.

5. The risk of theft is higher.
Think about it -- if your relationship with your caregiver is illegal, which means it's in some sense secret, your caregiver knows there's less chance that you'll report abuse, theft, or other problems. The feeling of being able to "get away" with more can lead to serious problems down the line that you don't want to deal with.

6. You may have to deal with high turnover.
According to geriatric care managers and other experts in senior care, caregivers hired under the table have much higher turnover than caregivers hired through agencies or registries, or even those hired independently but employed legally. It makes sense -- there's no paperwork to document the job, therefore no hassle to leaving and finding another. Without a contract or any legal agreement, you're not protected from someone simply quitting with short or no notice. This is probably the least of your worries, given the seriousness of some of the issues above, but you don't want a frail or ill loved one left without care available.

Melanie Haiken

Melanie Haiken discovered how important it is to provide accurate, targeted, usable health information to people facing difficult decisions when she was health editor of Parenting magazine. See full bio

about 1 year, said...

It doesn't matter if you hire private or from a license home health agency. Savvy serial abusers know how to work the broken justice system by hiding criminal past. For instance, California Penal Code 1203.4 doesn't include crimes of abuse under Ca Penal Code 368, as crimes that can't be hidden through background checks, allowing abusive caregivers to slip back into system caring for vulnerable disabled adults and the elderly. http://www.cbs8.com/story/34022954/abuse-on-camera-nurses-criminal-record-cleared-family-outragedhttp://sooo.senate.ca.gov/sites/sooo.senate.ca.gov/files/dangerouscaregiversreport1.pdf

over 1 year, said...

I have worked under the table for many years as a caregiver for clients. I have had very successful relationships with both my clients and their families never had problems. First off, all these warnings listed above of what is dangerous is totally absurd and untrue. Care seekers are responsible in making sure they hire the right caregiver as well as care providers are just as responsible for accepting the right client. 1) I am registered in my state that is requiring all care providers to complete Live-Scan fingerprint and cleared background check with FBI and DOJ. I have to renew every 2 years. 2) I provide TB clearance and recent flu shots. This takes the work out of my clients and their families hands. 3) I requested that they are not responsible for withholding taxes, that is a decision I made with all my clients, never encountered a reporting problem. 4) I never had an accident on the job. The majority of claims due to falls are usually from scam artists and insurance fraud experts. 5) Turnover rate are caregivers who are paid poorly by agencies, not private clients. Did you know agencies pay their caregivers minimum wage? Not even a living wage. Caregivers who work a full 8 hour shift are not even making $100/day? That is criminal. This is why the government is cracking down on agencies who are not paying overtime with hours worked more than 9 hours per day. Most agencies have had to do away with Live-in care because of the demands of overtime laws that they have to charge clients double the amount and for a Live-in client has to have 3 caregivers per 8 hour shift to avoid overtime. This is good because of several lawsuits are from caregivers who were not paid properly for overtime but now all agencies have to comply with overtime rules only because they are forced by law. Home Care agencies have a terrible reputation as being the worst companies to work for because they treat caregivers nothing but working machines. They are cheap never offering benefits, pay raises, paid vacation or sick leave. $15/wage is coming soon in Los Angeles so hopefully that will cause agencies to go out of business. 6) Agencies don't always conduct criminal background checks and train caregivers so your really your best bet is hiring on your own. It is not guaranteed that their caregiver is 100% clean and well trained. Trust me, with years of experience in this field, it's all about how you choose a caregiver. I am doing very well with my clients and satisfied with my cash wages.

almost 2 years, said...

I worked under the table as a caregiver for a year and a half. Used 8,ooo of credit card, signed promisary note saying I would pay back within 6 months going off of my wages per month. after signing the note they fired me and and filed charges of grand theft, elderly abuse, and identity theft. I was considered a family member. was hired to take care of the woman but took care of the husband & dog and all household duties includeing working on days off that I was not paid for. was only paid for taking care of the one person. I couldn't paY THE MONEY BECAUSE I WAS WITHIN 2 HOURS JOBLESS & homeless. what can I do

over 3 years, said...

My sister was POA for my father (recently passed) and he hired caregivers under the table. If someone reports this, who will pay? The POA who handled the finances, or the estate?