The senior caregiver you’ve hired is most likely a household employee, not an independent contractor. Here’s why:
“The vast majority of in-home senior caregivers are classified as employees because they don’t meet the independent contractor criteria; therefore, the employer must administer the payroll and tax process, withhold the taxes correctly and remit them to the government,” says Tom Breedlove, Sr. Director of Care.com HomePay.
It may seem easier to have your senior helper file a 1099 as a contractor, but because they are your employee, your incorrect filing can be considered tax evasion by the IRS. “If you misclassify your senior caregiver, you are subject to tax evasion charges, and that comes with back taxes and penalties that everyone wants to avoid,” Breedlove says.
It will also be worse financially for your caregiver to file as a contractor. They will end up paying more taxes at the end of the year because independent contractors are required to pay both the employer and employee portions of Social Security and Medicare taxes. And having them file as an independent contractor will disqualify them from certain government benefits, such as unemployment insurance.
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Comparing household employees and independent contractors
“The difference between an employee and an independent contractor hinges on control in the workplace,” Breedlove says. “An employee is someone who doesn’t have control of their work environment and therefore reports to and works for someone else.”
You have an employer-employee relationship with your senior caregiver, meaning that you are in control of how they spend the day with your parent or elderly relative. They take your loved one to run errands, help them get ready for the day, administer their medication and handle any issues that come up — all based on your strategies or the advice of a physician. Together, you are a team, but ultimately you call the shots. And as an employee, they come to your home (or your senior’s home) and use any necessary supplies provided there.
Defining independent contractors
An independent contractor, if classified correctly, has complete control of their work environment. They set their hours, set their place of work, set their rate of pay, typically offer their services to the general public and, most importantly, are fully responsible for the administration of the payroll and the tax process.
An independent contractor is hired to perform a job or service for an individual, but that person has no control over the details of how the services are performed. Generally, an independent contractor provides needed equipment and supplies, creates their own schedule, can hire other contractors to fill in for them, etc. Also, contractors don’t work regularly for the employer; instead they are hired on an as-needed basis.
Filing taxes for caregivers hired through agencies
If you hired someone through an agency, it’s important to ask the agency if they file taxes for their caregivers or if you are responsible for doing so. Many agencies have an employer-employee relationship with their caregivers and will handle their payroll and tax filings. But some agencies only act as an intermediary and don’t handle this type of paperwork. Discuss the tax policy with your agency during the hiring process, so you don’t have to worry come tax season.
If you do your own search and hire a caregiver who isn’t associated with an agency, then you are fully responsible for filing household employee taxes for them.
So classifying your caregiver as an employee leaves the IRS happy, keeps your family out of potential legal trouble and reassures your caregiver that you have their best interests at heart. Plus, if you ever need to part ways, you’re creating a safety net for them with unemployment insurance. After all, they are an important part of your family and you want to make sure they are taken care of, just as they take care of your loved one.
