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Does anyone do 1099 forms?
All of my Mom's private caregivers do not want to do that. And I don't blame them. Most need health insurance and do not want to show income to the government. I never required a 1099. However as a POA I am being dissected by a family member who has hired a lawyer and this question has come up. Thoughts?

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Here is the labor law in MN (my state) if you hire an in-home aid:

"WORKER CLASSIFICATION
When a family hires someone to perform duties in or around their home, they are considered a household employer. The IRS views the worker whether a nanny, health aide, housekeeper, senior caregiver, gardener, chef, personal assistant, estate manager, etc. as an employee of the family in nearly every case.  Misclassifying an employee as an independent contractor (using Form 1099) is considered tax evasion..."
(source: https://www.care.com/homepay/resource-center/requirements-by-state/minnesota)

Then it goes on to say how they are responsible for the withholding taxes, contributing to Medicare and SS, quarterly tax fillings and distributing forms annually like W2, W3, etc., AND required to pay the minimum wage set by the local government (BTW, still think mandatory $15 minimum wage is a "good idea"? Because that's what people will be paying for in-home private care).
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Reply to Geaton777
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This is a true story. An independent carpenter hired someone and paid under the table. The hiree got a permant back injury. Because the employer did not even carry workers comp and the employee had no insurance, he got sued. Result was loss of business and personal bankrupsy. The younger the employee means s higher payout based on years needed to support themselves and family.
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Reply to MACinCT
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Well, ok...so you want to fix it right?

So, no matter W2 or 1099, your going to get fined for failing to meet IRS deadlines. So, hire a enrolled agent, they are cheaper than a CPA and in my experience are more knowledgeable plus they do a CPAs work then the CPA just signs off.

How much did the employees make over the course of a year? Did an insurance policy pay for any of the care?
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Reply to Stacy0122
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If they want health insurance, and can't afford it out of what they make, they probably shouldn't be self employed. You are supposed to do a F1099 and that's what the attorney is going to tell you. F1099 is supposed to go to anyone who you paid $600 or more during the year. You're right about the caregivers not wanting one, however, because they pocket their entire pay check. If you pay $10 an hour, they go home with $10 an hour while a private business employee will have taxes taken out of their check. Who wouldn't want to go home with the entire hourly wage?

Then you have your conversations from those who get angry about someone getting government benefits. Quite often the most outspoken are actually aiding and abetting the issue because they can hire someone without the regular required hiring documents and pay a private person less than they would if going through an agency. ---- Many people are able to get benefits based on zero income if it is not reported. There are Food Stamps - reporting no income in Texas for a family of 4 would net $680 in grocery money (and even more from January to Sept 2021 because of covid). Someone receiving unemployment (and even higher than normal amts due to covid) can draw the max on that benefit because no income is reported. Appears they are still not working. Then there is housing - possibly zero rent if they report no income while actually working many hours.

Then the downside of not reporting for you - you can't claim it on taxes as a medical expense if you never reported who you paid it to.

Not telling you what to do, just providing a little info on unreported income.
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Reply to my2cents
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my2cents Apr 22, 2021
Just reread the initial post . 'they need health insurance and don't want to show income to the government'. You are knowingly helping one or more commit fraud. And you just published it on social media.

The government insurance has different levels, and you have to have some kind of income to even get it - can't report -0- income and get it. Let's say they have the $1500 per month policy. They report a little income and have to pay $300 a month. The government subsidy covers the other $1200. For 12 months, the government 'gave' them 14,000. -- I just completed tax documents for someone who received a lump sum SS disability payment at the end of 2020. That money counted as total income for the year, so he has to pay back over $10K for the healthcare payment the government covered during last year. (Because of covid, that rule of payback is being forgiven for 2020, but had it not been for covid he would owe over $10K) So if IRS caught your person (easy to do when you are buying more items with money you don't have) and your person happened to mention you as the 'employer', I suppose both of you could have a problem. Not sure how IRS would handle it.

Based on the comments I first posted, do you now see how much 'free' assistance someone can potentially get by committing with your help? Not to mention, the $10 per hour employee getting taxes taken out of check has to pay their own rent, not elig for food stamps and pays for their government health insurance. You can bet that attorney is going to direct the family to do the 1099 to avoid all this plus avoid pitfalls with the Medicaid (if that is ever needed).
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IRS has it that caregivers are household employees and so your mom or you as DPOA for her are required to deal with taxes appropriately. It’s in IRS publication 926. Each should fill out a w-9 yearly. Mom or you as her DPOA does FICA quarterly & W-2 each year. Quickbooks has a program for doing all this, TurboTax as well, should you not want to use a CPA. There are lots of options to do this and easily found. If your state has taxes, there will a W-4 as well.

Household help are NOT independent contractors. They are employees. Only way they could ever get a 1099 would be if they had their own business, provided you the information for you to use to do the 1099 and you had them do a signed and dated independent contractors self certification with checklist.

Personally I’d do an I-9 on each as well. Mainly as they need to provide you 2 types of ID which you xerox..... so should in the future you need to contact any of them, you have some sort of governmental ID to refer to try to get in contact with them. The W-9 & W-4, they fill out themselves, so if it’s not accurate, you have no real way of knowing.

Will the IRS find out? I’ll go with yes, mainly cause if you are using more than 1 caregiver and they all are pretty adamant on getting paid under the table, they are either undocumented or uniformed legal or on a needs based program and would not be eligible if the $ you paid them was reported. If they are using needing health insurance as their reason and do not have another job, then they are probably on low income Medicaid. Eventually the $ will surface then IRS will send mom a Notice as she was the employer and responsible. If INS does a sweep, and they find a pattern of employment by looking at the individuals prepaid cards or wire transfers, you’ll get a Notice from INS. Neither IRS or INs are to be trifled with ime.

If your brother has actually hired an atty to look into your ability to be a proper POA for your mom, that’s serious. I’d fold it and tell the caregivers that from here out it will be all required reporting and give each of them a W-2 & I-9 & W-4 to fill out, sign and turn in within 2 weeks or otherwise you will hire from a in home health company starting in 2 weeks. If Bro has hired an atty, there are - I’m guessing -other financials & legal that he is concerned about. He’s got you by the short hairs as fiduciary duty requires you to be aware of IRS regulations & at least a cursory review of a person legal status to work. If you say you didn’t know about the IRS stuff then your basically saying your too uninformed to do your fiduciary duty as required by a DPOA. If you wrote the checks to pay the caregivers out as “cash” and you cashed them personally, it looks like “self-dealing” which a DPOA is not supposed to do. If you do not have in detail records of names, dates, hours worked that correspond to cashed checks & workers that will back you up, well Bro has it looking like you’re self dealing. If mom was the one that cashed the checks to pay them, and there’s no precise paper trail, it makes her look incompetent and you unsuitable as POA.

To hire an atty, is pretty definite. I’ve found most folks are not too too bothered by folks getting paid under the table for personal service type of work.... may not like it but ignore and move on. If he hired an atty, he’s coming in to have you removed.
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Stacy0122 Apr 22, 2021
Iggy, an employer is required to do an I-9 and W-4, they do not do a W-9 on an employee.
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Paying people under the table, in cash, without proper paperwork is illegal. Do understand that ANY ONE of these people you pay in this manner can bring a case against you and you can be prosecuted by the IRS.
See a Lawyer if you are responsible for paying for care for your mother so that it is done properly.
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Reply to AlvaDeer
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I understood that a 1099 cannot be used for wages. Its for things like interest on accts and investments. You should have been deducting for taxes and SS. Matching SS. Then every quarter send money to the IRS and SS. You are an employer.
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Geaton777 Apr 21, 2021
1099s are to report income (wages, dividends, interest, etc). If she paid wages in excess of $600 in a single calendar year to any one caregiver who was NOT an actual employee (or hers or another agency) but just a private individual (i.e. not someone who is incorporated or formed their own LLC) then she needs to create and send a 1099 to each one. Her caregivers were not being treated by her as employees if she wasn't withholding taxes from their paychecks, etc. I work for my corporation and I have employees. They get W2s. All other freelancers that meet the above criteria get 1099s (the forms can be found online).
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If you have paid them in cash and without getting a signed receipt from them, I don't think there's any way to create a 1099. If you paid them in checks, Venmo, Paypal, Zelle, etc. then there is a "paper trail".
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Reply to Geaton777
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This is a big question, but here is a starter short answer:

The people you send 1099s to don’t get a vote as to whether you send them or not. You are required to if you pay them as private contractors over the reporting threshold ($600.00). Even if they are paid cash below that threshold with no 1099, they are still required to report it as income.

But what they do with their own taxes is their business and entirely outside of your control, you just attend properly to yours. You could end up paying taxes yourself on this money paid. Google “IRS nanny tax” to read about requirements and limits.
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Reply to Goddatter
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You are paying caregivers under the table?

So when Mom needs Medicaid, the funds you are disbursing will look like gifts.
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