During these unprecedented times, families are continuously adapting to make sure their care needs are met and that their caregivers are taken care of. Within the past few months, the federal government passed the Families First Act, the CARES act and the Continuing Appropriations Act 2021 to try and help employers and their employees deal with challenges presented by the COVID-19 virus.
“These pieces of legislation help both employers and employees access benefits like paid sick time, paid family leave, tax credits and additional unemployment benefits,” says Tom Breedlove, Sr. Director of Care.com HomePay. “However, these benefits highlight the importance of paying caregivers legally because if families are paying under the table, neither they nor their employee will have access to them.”
Below are more details about the benefits families and caregivers can receive from these three laws.
1. Tax breaks for paid sick leave and paid family leave
Household employers paying legally may be eligible for reimbursable tax credits if they pay their employee while they’re out of work.
- Up to $5,110 in tax credits for paid sick leave if their caregiver is sick, or up to $2,000 if they need to take care of a family member.
- Up to $10,000 in tax credits for paid family leave if their caregiver cannot work because their child’s school or daycare is closed due to the COVID-19 virus.
For more information, see our breakdown of the Families First Act for details on the tax credit.
2. Expanded unemployment insurance benefits
If you have to let your caregiver go due to no fault of their own — such as your needs changing because of the COVID-19 virus — they will most likely qualify to receive unemployment benefits from the state while they are out of work. Under the Continuing Appropriations Act, benefits have been expanded so employees are eligible for up to 50 weeks. Additionally, eligible employees can receive $300 extra in unemployment benefits through March 14, 2021.
If you’re paying under the table, the state will not award benefits to your caregiver because they will have no record of you contributing tax payments to the unemployment insurance pool.
3. Stimulus checks
The CARES Act gave caregivers a one-time payment to help make ends meet. Similiarly, the Continuing Appropriations Act provides another direct payment for individuals making up to $75,000 per year and couples making up to $150,000 per year. The payment is up to $600 for individuals and $1,200 for couples, along with an additional $600 per child dependent the caregiver has. The catch is that they must have a Social Security Number and have filed a 2018 or 2019 tax return to receive this payment. If your caregiver was paid under the table and never received a W-2, they may not have filed a tax return and would not be eligible for this financial benefit.
How HomePay can help get your caregiver on the books
We regularly work with families that have just learned of their tax and payroll responsibilities and want to get their caregiver on the books. We can quickly and efficiently file all the household employment tax returns you have missed and work with the state and the IRS to manage any notices you may receive. From there, we’ll continue to manage all the tax, payroll and compliance aspects of household employment on your behalf so you don’t have to worry about mistakes or filing errors. At the same time, your nanny or caregiver will receive the protections they deserve.