Paying a caretaker in cash with conditions - is it legal?
I am the adult caregiver for my elderly mother and father for the last 3 years. They live in and rent a house that belongs to my husband and I. My father is 83, has had multiple falls and broken bones and is somewhat mobile with the assistance of a roller walker. He was also diagnosed with dementia close to a year ago, is on Exelon patches, and has sundowner's syndrome really bad. My mother is 72 and her health is not good due to a benign pituitary brain tumor she had at the age of 48. She has not driven a car since that age, and the tumor is growing again. She is on medication to help control the growth and so far, it is working. My father hasn't driven in about 2 years. Thirteen months ago, I enlisted the help of Veteran's Legal Assistance Network to help me with the process of filing for VA Medical Care Assistance and to move his liquid assets to annuity-type insurance policies. I could foresee that in spite of my father's declining health...my mom was not comfortable with the thought of him going to assisted living without her, but she does not want to go with him as well. He began receiving 1,908.00 per month from VA to go toward in-home care. About 4 months before this, my parents completed a Will and named me Financial POA. I have paid their bills and taken care of their financial matters for the last 3 years now. This is where I get to the heart of my story and hope that someone can help me with the dilemma I am in... In July, I was exhausted from running back and forth to my parents house and trying to keep my parents fed, my father bathed, and all of the other things that go along with caretaking. I finally convinced my parents that hiring someone to come to their home a few hours a week would offer mom and I a little relief. A friend of mine called and told me that the caretaker that had cared for her father-in-law for 5 years was looking for another job because her father-in-law had passed away. I knew that if my friend had been happy with the caretaker, then she must be really good. My friend also shared with me that they had always paid the caretaker cash because the caretaker suffers from diabetes and cannot afford the $1,200 in meds she needs for her diabetes. If they would have paid her by check, she would have lost her benefits. The caretaker has been really awesome with my parents and she works 45 hours per week...and my parents like her a lot. This is worth a lot to me; however, the stress is still there because my father gets very agitated if I do not come by nearly every day...and often times forgets that I was actually there the day before.
Now that I have provided background information, here are my concerns and questions:
In order for my father to receive VA benefits for in-home care, they have to pay out $3,300.00 per month for care. Keep in mind that out of that 3,300, VA send my dad a check for $1908 to apply toward that amount.
VA doesn't care if a family member is paid to take care of the loved one, or a professional or even if he goes to an Assisted Living Center....just so long as there is $3,300 per month being billed out for care.
Because the caretaker is paid in cash so that she will not lose her benefits, I had to figure out a way to bill the care. So, I opened a checking account in my name and my parents bank generates a check to me twice a month for $1650.00 to show that it is billed out. I then write a check for "cash" every friday from that account...we pay her $2,000.00 per month...thus she gets $500.00 per week. This leaves $1,300.00 per month left over out of the 3,300.00.
My husband has me put back the whole $1300.00 per month into a savings account for self-employment taxes. This may seems like a big chunk, but my husband and I are in a 30-35% tax bracket which means we pay a higher amount of self-employment tax.
Concern: I am having a hard time with the fact that my husband and I will be paying self-employment tax for 2009 on money that is going to the caretaker. Is this right? I know that someone has to pay taxes on what is billed out as care every month, thus this inevitably falls on our shoulders.
Does anyone know if there is another way I can do this? Our high tax bracket causes us to have to pay more and my husband feels that we shouldn't be having to do this.
The caretaker and I agreed on $2,000 per month, but she told me that she likes to be paid every friday. In the beginning I was thinking...okay, so I will pay her $500.00 every friday. But...I began to realize that this means on the months that have 5 fridays....she gets an extra $500.00 per month. Once again...is this right? She insists on being paid every friday. Of course, I feel a little stupid right now for not realizing in the beginning that there are those 5 Friday months.
Any advice on my dilemmas is appreciated. I do know now that my paying her cash is not really an honest thing....however, we are not defrauding the gov't, because I am paying the taxes instead of her. I have tried to explain this to my parents, but they do not understand. They would be very upset if I thought of finding someone else that I could pay via check, thus taking the tax situation out of my life.
Do any of you do this as well? Is this a normal thing? I know that my friend's father-in-law didn't have the VA benefit dilemma and the money just didn't get reported by either party...which definitely isn't right.
I still pay my parents bills for them, buy their groceries for them, take care of meds, etc. It's really strange because I thought if someone took care of them 40 hours per week, that things would be less stressful...however, I think it is more stressful at times because of the financial part and my parents get very upset if I do not come over nearly every day or if I go anywhere with my husband...out of town on a business meeting, etc.
I apologize if I have rambled and if I sound like I feel sorry for myself. I just do not know what to do and/or if this is a common thing.
Any advice is appreciated!
Your question is quite long, but the answer is quite simple. You are not complying with the law if you make these payments in cash without the proper deductions and reporting. This person is an employee and you have certain requirements in regard to tax reporting, tax withholding and workers compensation insurance with which you are not in compliance. I know this is not the answer you want to hear, but the risk of not complying with the law could be significant.
You are missing out on alot due to this situation. One is why cause yourself a financial loss because an unethical caregiver wants to be paid cash? She is committing fraud, and you are involved because you know the situation.
Hiring a private person puts your parents at risk for a host of problems. She does not carry liability or workman's comp I assume? She can sue your parents if she is injured in their home, your parents have NO recourse if she causes harm to either of them.
There are tax benefits for eldercare that you and your parents are not able to access because this caregiver is directing how you do things.
She may do a decent job, but when you say you still carry a heavy load and she's there 40 hours a week, what is she doing all those hours? There are services available that would significantly improve your family situation, but you are unaware of those because a private caregiver doesn't have the knowledge to provide answers.
$2000 a month is NOT $500 a week. You should sit her down and show her how she has been overpaid and plan on deducting what she has been overpaid. My guess is she may quit at that point, so be prepared in adavance to replace her. If you had an ethical agency in place you would be able to recoup your overpayments.
I know a lot of families hire private caregiver's because they are generally less expensive than agencies, but the risks and lack of resources is not worth the cost savings. In the end it could cost so much more.
If this caregiver is unethical about her income, what other areas of her life and work is unethical? Where else is she dishonest?
I suggest contacting the VA for a list of agencies they recommend, and start interviewing. Your parents will adjust. Your parents also have the possibility of getting respite care hours paid directly throught the VA, aside from the aid and attendance pension benefit. The care will have to be through an agency that contracts with the VA, but then you and your parents will be protected, your financial worries will be over, and most likely the agency will have knowledge of resources that will help your situation.
There are medication management companies that can resolve your duty in getting meds, setting up meds, and contacting their doctors about their meds, and refills. If you email me I can give you some resources that will help with that.
Believe me when I tell you if you change this situation to agency caregiver's you will have much less stress.
I wish you and your parents well! Angil Tarach-Ritchey RN, GCM Visiting Angels, Ann Arbor
We have a private caregiver because my dad needs 24/7 care, and cannot afford the $7700 it would cost thru an agency. We luckily found someone who was a nurse and had a lifetime caregiving background, who also needed a place to live. She gets to live with my dad (near the ocean, i might add!) and we pay her $397 twice per month, no taxes taken out, no W2. I know that is pathetically low, but she also can borrow money from my dad if she needs it. It's a mutual arrangement and we're both grateful. I am aware of the legal risks we took but we had no choice. We had her sign an arbitration agreement, checked her background and references, and so on. She's been a blessing and soulmate for my dad. As far as your situation, I cannot speak about the legality part, but I can tell you that I had the same discussion about the monthly fee vs bi-weekly or semi-monthly with her. Once I explained the math, she was fine with the calculation. $2000/mo times 12 months = 24,000 annually, divided by 52 weeks = $461.54 every friday. She should be ok with this, since she agreed to 2000 per month. Let us know how it turns out! Good luck.
I do not know what that laws are in your State regarding aid for those who wish to remain in there homes with a caregiver instead of going to a nursing home I can only tell you my experience.
I am disabled and live in PA. We have a program called the Independence Waiver Program. It is run by the State and allows you to utilize an Agency to provide caregivers, that you choose, they pay for these caregivers out of your "allotment" from the State. Your parents would be granted a certain number of care hours per week depending upon what all is needed in the home. A caregiver or 2 if the hours exceed 40 as mine do comes & goes their "time-sheets" are signed by either yourself or your parents and the Agency pays them.
Mr. Steve Weisman is correct in all that he is saying. You can most likely find out about any programs like this through either your County Assistance Office (Welfare) or through your local center on aging.
This is just an idea based on my own experience.
I wish you well & God Bless.
I have been a private duty medical assistant for 10 yrs. & worked as a medical assistant for physicians and went to college for several years part time for this purpose. I am an advocate for seniors and I have great respect, appreciation for all I can learn from each person I care for and I believe music, dancing,reading, laughing and all of the little things that make a huge difference! Along with plenty of prayer's ???? My last position I was paid $13,500 a year. That is the amount of money a person can give as a cash gift so they are not responsible for paying workers comp. SSI ECT... I worked Part time for them. I am still grieving.... I have been self employed and paid my own taxes for positions also. I have sub contracted positions too. I have also worked for the county. I have worked for what the person could afford. I love caring for Seniors and I am very competent, loyal, respectful and sensitive to the needs of my Clients. I have great experience with Alzheimer patients. God bless you and your family
Here is my # if you want to talk 231-838-6898