The OP stated the caregiver wants to be paid "under the table", that is by definition cash and no taxes. Aside from helping the caregiver cheat the system this could come back to bite KP0415 if there is ever a need to apply for medicaid in the future because there will be no record of where this money went.
Oopsie! I sort of missed the boat, didn't I? I meant to ask if they needed some ideas about what to say if they don't want to go along with paying under the table(but must have seen a squirrel run by and forgot!) Lol. Sparkles
It is illegal. It is dishonest. And It is begging for trouble.
Tell the lady this is not how you do things. If the implications for her are that her income, once taxed, makes the job financially unviable - if her pay after tax is so reduced that it barely covers her travel expenses, for example - you may need to support your principles with something practical, like more money.
Sigh. I don't mean to sound so cynical. But this is it, this is why people evade and subvert the laws - because it costs. From her point of view, she probably sees the under the table arrangement as a win-win - you pay lower wages but she keeps more of them. That, plus the eternal "oh, everybody does it, it's no big deal." All you can do is say everybody doesn't include you, and set a better example.
So, if the caregiver is an independent contractor /business owner /sole proprietor, and they make over $600 during the calendar year, then yes, you are required to fill out a 1099 and give it to the caregiver plus file it with the irs. And generally, if they are a household employee(more on identifying if they are a household employee in the guide by the irs mentioned below), and they make over $2100 a year, you are required to give them a w-2 at the end of the year, and withhold social security and Medicare (7.65%) plus your share that you pay, of social security and Medicare (7.65%).
You can Google topic no. 756 Employment Taxes for Household Employees, and read more about it on the irs website. It isn't too long and is mostly in plain English, a rarity for the irs! Hahaha. Hope this helps. Sparkles
I wonder why this sort of info has to come from a website not connected with the national govt.?? Is it because it's esoteric info and hidden from ordinary people without professional credentials who just want to live their lives without the hassle of hiring and paying tax advisors/accountants?
I 'm a college grad and intentionally practically computer illiterate, if that helps you understand my perspective.
I don't even care to try to figure out the taxes for April 15. I just save my receipts and various forms from my payees: banks, broker, SS, etc, then spend a modest amount on an accountant to do the paperwork. I package the data the same way every year and i don't care if the work is done on a website "everybody" knows about , or with a quill pen on ledger paper, just so long as i can do other things with my time.
It would be nice to know there is an easily accessible source of information written in plain english; someplace besides a website like this one, where competent people are generous enough to share their knowledge and the various pieces of advice can be compared and considered, without it costing a month's rent to buy the info outright. But how many people who need the info will not even know this site is here?
As I age, I have more questions about life than I can find answers for, but watching the birds at the feeder while listening to music keeps my soul alive, but worrying about tax paperwork just shrivels my soul.
Here is what you can say depending on the state you live in and the dress code in the prison system...say "I would but I don’t look good in orange (or stripes)"...😂. We had a receptionist who said that when patients would ask her to commit insurance claim fraud. Nice way to get the point across.
A different risk turns up if there is an accident of some sort, the caregiver is injured and looks for compensation from you. It can be a legal minefield with some insurance policies if the employment status is unclear and undocumented. And more generally, when you know someone is happy to cheat, you have to have some doubts about trust.
One often overlooked point is that without social security taxes paid the caregiver will not receive any social security benefits when they are older. The other point is no one is paying workers compensation and if she gets injured on the job the family can be facing big costs and possible fines. There is no liability insurance or bonding either. Once you figure all that in, the cost of hiring a good agency caregiver isn’t much different. When a caregiver is hired privately it is simply hoping nothing bad will happen to save some money.
The IRS has specific rules about how much you can pay a person without being required withholding taxes. This makes sense, for small amounts. We found it easier to go with company who provides services for Mother.
Amount of time and pay legalities aside the first reason that comes to me and should make sense to the caregiver as well once you mention it is Medicaids spend down rules and any assistance or application to deductibles it might qualify for. If your dad needs more care and or enters a NH or MC he may also need Medicaid to cover the cost and you will need to be able to account for all expenditures for his care and living expenses going back 5 years I believe for that approval. If you are paying the caregiver under the table you won't be able to account for that money and may have to come up with it or pay the equivalent for his NH bill out of your pocket (or someones other than your fathers). I would guess however that you could 1099 them as an independent contractor at the end of the year and that would cover you and accounting for your dad's expenses while leaving it up to them what they do with it tax wise. That also gives them the full amount weekly (no withholding) to use as they see fit which is probably what he or she is most concerned with, the immediate income.
Sorry - coming back to Sorgalim's post, I wonder if perhaps we're talking at cross purposes. She seems to be distinguishing between agency caregivers and those who work independently for families; and of course there is nothing wrong with a contract between an individual caregiver and a family. But that's no excuse for not complying with employment and taxation law.
And if a corporate lawyer is inciting hard-pressed caregivers to avoid taxes, then in my view the bloody woman wants reporting to the police. These people! You get the same thing with politicians fiddling their expenses, or 'oh dearie me I didn't notice' employing domestic staff without sorting out their work permits and visas. They set the dam' rules that we're all trying to make work, then whine their heads off when they get tripped up. I've no bloody sympathy.
I suggest you check with the IRS or a tax attorney. As I see it, the big issues for you will be accountability for the money you are spending and personal liability should the care-giver be injured in your home. Employees have the benefit of Worker compensation insurance, disability insurance, etc. Independent contractors are supposed to provide that for themselves. Back injuries are fairly common in care-giving and can be very expensive to deal with. Whether the care-giver is considered an independent contractor or an actual employee may be something that is up for debate by those wiser than I, but, I'd say that paying under the table is a very big risk for all of you. In my experience, it's generally a better idea to stay within the legal black and white areas.
I sort of missed the boat, didn't I?
I meant to ask if they needed some ideas about what to say if they don't want to go along with paying under the table(but must have seen a squirrel run by and forgot!) Lol.
Sparkles
It is illegal.
It is dishonest.
And
It is begging for trouble.
Tell the lady this is not how you do things. If the implications for her are that her income, once taxed, makes the job financially unviable - if her pay after tax is so reduced that it barely covers her travel expenses, for example - you may need to support your principles with something practical, like more money.
Sigh. I don't mean to sound so cynical. But this is it, this is why people evade and subvert the laws - because it costs. From her point of view, she probably sees the under the table arrangement as a win-win - you pay lower wages but she keeps more of them. That, plus the eternal "oh, everybody does it, it's no big deal." All you can do is say everybody doesn't include you, and set a better example.
And generally, if they are a household employee(more on identifying if they are a household employee in the guide by the irs mentioned below), and they make over $2100 a year, you are required to give them a w-2 at the end of the year, and withhold social security and Medicare (7.65%) plus your share that you pay, of social security and Medicare (7.65%).
You can Google topic no. 756 Employment Taxes for Household Employees, and read more about it on the irs website.
It isn't too long and is mostly in plain English, a rarity for the irs! Hahaha.
Hope this helps.
Sparkles
I 'm a college grad and intentionally practically computer illiterate, if that helps you understand my perspective.
I don't even care to try to figure out the taxes for April 15. I just save my receipts and various forms from my payees: banks, broker, SS, etc, then spend a modest amount on an accountant to do the paperwork. I package the data the same way every year and i don't care if the work is done on a website "everybody" knows about , or with a quill pen on ledger paper, just so long as i can do other things with my time.
It would be nice to know there is an easily accessible source of information written in plain english; someplace besides a website like this one, where competent people are generous enough to share their knowledge and the various pieces of advice can be compared and considered, without it costing a month's rent to buy the info outright. But how many people who need the info will not even know this site is here?
As I age, I have more questions about life than I can find answers for, but watching the birds at the feeder while listening to music keeps my soul alive, but worrying about tax paperwork just shrivels my soul.
And if a corporate lawyer is inciting hard-pressed caregivers to avoid taxes, then in my view the bloody woman wants reporting to the police. These people! You get the same thing with politicians fiddling their expenses, or 'oh dearie me I didn't notice' employing domestic staff without sorting out their work permits and visas. They set the dam' rules that we're all trying to make work, then whine their heads off when they get tripped up. I've no bloody sympathy.
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