Tax & Workplace Liability
Household help is anyone who does help in or around your home. The worker becomes your employee if you control what work is done and how it is done.
If you dictate when the caregiver is on duty and supply the equipment to provide care, you’re building an employer-employee relationship. Even a part-time caregiver can be considered an employee, especially if the caregiver doesn’t provide the same type of service to others.
If you pay a household caregiver who is your employee more than $1,700 in 2009, the tax code requires you to withhold and pay Social Security and Medicare taxes. (The Internal Revenue Service makes some exceptions, but they typically don’t apply to situations in which adult children hire caregivers for aging parents.)
If you pay the caregiver wages of more than $1,000 in any quarter, federal unemployment taxes must also be paid. State and unemployment taxes must be withheld and paid as well. If the taxes are unpaid, the taxpayer must pay what’s owed, and will face late filing penalties of between 5% and 25% of the underpayment plus interest.
Consumers can avoid tax snags if they pay an agency directly, and if the agency is the caregiver’s official employer. Another option is to hire a geriatric-care manager who screens, arranges, monitors and pays the caregiver on your behalf.
Employers are also responsible for verifying that workers are legally entitled to work in the U.S. An Employment Eligibility Verification form — I-9 Form — must be completed and kept on file by the employer.
Employee injuries pose one of the biggest financial risks. Federal and state laws require employers to take out workers’ compensation insurance. If there is none, and a caregiver is hurt on the job, the family is responsible for medical expenses and disability payments. Consumers shouldn’t assume homeowner’s insurance will cover this, as policies may exclude household help. They may need to buy general liability insurance.
Discrimination or harassment suits from caregivers pose another risk. An umbrella policy with a discrimination rider can provide protection, but it’s expensive. These are all things to consider and be aware of if you choose to hire caregivers independently but of course all these potential problems are avoided when you use a full service agency. A full service agency has bonding, liability and worker’s compensation all built in, plus the great added benefit of providing substitutes when the main caregiver needs time off.
