When you need a caregiver for a loved one, one of the first considerations you may have is whether to directly hire a worker or contact a home care agency.
Either of these two is a good option. Except when you do decide to directly hire a worker, you will be considered the employer on record for tax purposes.
Thinking that you can save money when you hire the worker yourself isn’t exactly correct.
The IRS considers this type of work as an employee and not as an independent contractor for the simple reason that the senior controls what needs to be done by the worker.
This means the senior (employer) needs to report wages, pay taxes, and issue the direct hire (employee) a W2 form.
Yes, it seems appealing that you are shaving off $4-5 off per hour if you are to hire the worker yourself, but if you take a moment to consider what it would really cost you in the long run, you might be surprised.
Your common home care questions:
1. Can I issue a 1099 Form to my direct-hire caregiver?
No. The 1099 Form is reserved for Independent Contractors. In a caregiving situation, your direct hire is considered by the IRS as an employee because the senior controls what the caregiver needs to do.
2. Do I need to issue a W2 Form to my direct-hire caregiver?
Yes. Your direct-hire caregiver is an employee, and that means a W2 Form is required to report taxes and wages to the IRS.
3. What do I need to do to pay my direct-hire caregiver?
This comes with a lot of requirements on its own:
- You need to get FEIN (Federal Employer Identification Number) in order to pay a caregiver
- You withhold taxes and submit them to the IRS. There are the quarter and the annual reporting. Remember that you will pay fees when you submit your report late.
- You are required to follow I-9 guidelines for verifying the worker’s authorization to work in the US as well verify the Social Security number as valid.
- You may need to involve your tax professional in order to be sure you are in Federal and State compliance. That’s a cost.
4. Do I have to get insurance coverage for my direct-hire caregiver?
Liability Insurance and Worker’s comp insurances are coverages that you need to verify for compliance issues. If you are to use your homeowner’s insurance, what will your premium look like the following year if you had filed a claim?
5. Do I need to get health insurance coverage for my direct-hire caregiver?
This may be a benefit you want to offer especially if you want to keep your worker.
6. What happens if my direct-hire caregiver gets sick or does not show up for work?
This is where your decision to directly hire could stress you more than you’ve ever imagined.
Yes, you will have to look for an immediate replacement yourself. And where might that be? Your church, friend, neighbor, a friend of a friend, please not from craigslist.
Whichever way you find a replacement, remember to go through the process itemized in # 3.
All of these considered, would the savings of $4-5 per hour really worth your risk and effort?
If you are already discouraged at this point by all the responsibilities, there is always the option of calling your local home care agency.
An agency like Magic Touch Home Care will handle all the details for you.
About the Magic Touch caregivers:
- They are screened, and background checked at the state and federal levels.
- They are registered with the Department of Social Services.
- They are experienced caregivers who undergo an On-boarding orientation.
- They need to pass the required annual training which specifically covers senior health issues and how to properly care for them.
- They are employees of Magic Touch Home Care. If your assigned caregiver calls in sick, we got you covered. We’ll find a replacement right away.
- They have Dishonesty Bond, Liability Insurance, Worker’s Compensation, and Unemployment Insurance coverage.
- They are compassionate, caring, respectful, or they will be replaced if they do not meet the Magic Touch standard of care.
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