JanPeck123 Asked May 17, 2025
Has anyone had experience with paying a caregiver, and taking out the taxes?
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I have a woman who is a certified caregiver. She would like to work with my husband. She wants to have me pay her directly instead of going through an agency. I told her I'd either like to have her go through an agency so they can handle taking taxes our of her wages or pay her as an independent worker and she could handle paying the taxes on her wages herself.
She doesn't want to do either. She wants me to be her "employer" and take out her taxes before paying her, so I can pay the IRS. I have NO experience with such, and am worried about getting in over my head.
Does anyone know what this kind of arrangement involves?
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It is somewhat complicated. You have to register with the state to pay unemployment insurance and have workers compensation insurance, as well as pay quarterly state and federal taxes, including employer contributions to FICA,
It's not something I would recommend you do yourself. Find an accountant or bookkeeper who provides payroll services, and they will take care of all of that for you, as well as setting up direct deposit for the employee.
It's not as simple as just deducting Fed withholding, State withholding, Social Security and Medicare. Your accountant will also provide your employee with a W-2 at the end of the year, and will make all the quarterly payments to the correct entities on your behalf.
Go with a professional.
I have been searching for a few months and had narrowed it down to two that have been mentioned here. I have since decided to go with Poppins Payroll.
Gleaton777 suggested: https://www.care.com/homepay
IMPinky suggested: https://www.poppinspayroll.com/
I have talked to and emailed both several times and Poppins Payroll seemed to have a more simpler pricing. I don't remember all the other pros and cons but consistently Poppins Payroll explained everything better to me. My son is a CPA and has a Masters Degree in Taxation. He advised me to go with a payroll company that specializes in "Nanny taxes" because it is a field he does not have experience. I was also told that same thing by a local regular payroll company.
Just a reminder that we’re all here to discuss the topic, not each other. Let’s keep it constructive.
Nanny Taxes and Payroll Services | Poppins Payroll | Poppins Payroll®
We also set up Worker's Comp insurance for our own and our caregiver's protection. Also worthwhile. Workers Compensation | Insurance Products | Berkshire Hathaway GUARD
At this stage, I will go thru an agency. If she does not want to go thru the agency, so be it. I'm just a bit overwhelmed as it is and don't want to add more stress.
Thanks again.
As Isthisreallyreal pointed out, with an agency, you will pay a higher hourly rate, and the caregiver receives roughly half of that. Higher cost for you and lower wages for caregivers. If you like this woman and think she will be a good fit, try and work with her terms.
Others have pointed out the benefits for the caregiver of being an independent contractor, which would be simpler for you - just pay her by check and that's that. Send her a 1099 at the end of the year. But if she has already made it clear she doesn't want to do this, a payroll service is the way to go.
Doing your own withholding will be a major chore. You will have to set up withholding accounts with the Feds and your state (and possibly your city). You will have to process withholding for Social Security and Medicare. And don't forget Worker's Comp and Unemployment insurance. You will have to issue a W2 every year. The amount of work required will be way too cumbersome for just one employee.
I would offer to pay her under the table at a lower rate. If she does not want this, then just tell her you are going through an agency.
You would be doing any reporting, as in sending her a 1099 at the end of the year. Then she would give that to her tax preparer, actually pretty easy, except, she pays for all of her own SS/Medicare tax but, you get to right it off your fed taxes. As a sole proprietor her insurance and unemployment can be waived (in AZ anyway) just means she has none.
Maybe having a meeting with a knowledgeable attorney (tax attorney would be my choice) to explain the options available to both parties. Maybe you pay her a little more to be her own employer. The attorney can tell you what she would need to do to be a legitimate business entity in your location. They can guide you on what you need to do if you choose to be the employer. If you go this route, specifically clarify how her signing waivers for insurance and workman's comp insurance and unemployment exposes you to any liability.
In my state, you are required to have a business license. 50.00 annually and that's it.
One HUGE benefit of using a payroll service is your employee is covered by workman's comp insurance and that means she CAN NOT sue you if she gets injured doing her job. There would have to be provable gross negligence for her to sue.
There are so many benefits to being an actual employer through a payroll service.
Your caregiver can get deductions as a business that they can't get as an employee. It is ALWAYS worth speaking to a tax professional about the benefits of both routes.
My girlfriend gets to write-off part of her mortgage because she uses her spare bedroom to store her work supplies, her phone bill and internet because she requires them to do her job, her car insurance, maintenance, gas and mileage are all tax deductions, just to name a few benefits so people can see what I am speaking about.
I'd use someone local in your state as there may be some state or city taxes taken out of the paycheck.
We used a local accountant. It did not cost much for the service.
Most people and small business outsource this to a small accounting firm or local bookkeeper.
This is actually a really reasonable deal for someone to hire and self pay a caregiver. I know it seems like a lot, however, they are saving you work, learning how to do payroll, setting up all the accounts to meet all the legal requirements and they usually offer group health insurance to your employee at no expense to you and a group rate for your employee.
An agency is going to cost a lot more for you and your caregiver won't earn as much, so win-win.