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We paid my MIL's home caregiver off the books for 4 yrs. She is afraid to sign an affidavit saying she was the caregiver and was paid x amt of $, because she has not paid taxes on her income. We are on the last $80k, and will need to apply for Medicaid. What do we do?

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Agree with dragon flower. I’m sure this was a mutually beneficial arrangement. Why should the CG sign anything? Take the hit on the spend down. Hopefully those reading this will learn to think twice before paying someone off the books for 4 years. It’s not worth it.
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I disagree with what others have said. Nobody was "done a favor" by being paid off the books - either the caregiver or the MIL. Anytime a worker is paid off the books, it's so there is no record of it and nobody needs to pay taxes on the money. Since there were no Social Security taxes paid on this under-the-table income, this will impact the caregiver when she becomes old enough to collect Social Security.

If I were a caregiver paid off-book, there is NO way I would sign any affidavit, because it could come back to bite me later.
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repeated sorry
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I'm assuming the problem is that without her affidavit you have no accounting for that money/expenditure meaning you will need to come up with the amount again to spend down for Medicaid. If the caretakers reluctance is what she might end up owing in taxes (I'm not sure how much you paid her each year) maybe make the deal that if somehow the state or IRS comes after her for the taxes on the money because she signs the affidavit you will pay those taxes. This way she isn't out the money (even though technically she should be, though it could also be said that you should have paid her the difference to cover taxes too), there is probably a better chance that one wont trigger the other but I may be all wrong on that and in all actuality since you would have had to pay her more, covering taxes, if you weren't both taking the risk for the reward I would think that if the tax department and Medicaid actually communicate and you end up paying them it should come out of the spend down anyway. Hope that made sense. Either way it's bound to cost far less than having to come up with whatever it is you have paid her under the table in total.
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Sounds like you are still in touch with the CG. Have another conversation with her regarding the affidavit. Let her know based on your research (with attorneys etc) that signing the "private" affidavit will protect her as well. It will go no further than a simple statement that she did indeed "work" for your Mother. Nobody involved at this level will pursue her or even care about the "under the table" payments.

If it has to be dealt with "legally" through the courts etc she will indeed be liable for taxes not paid and penalties as well as her attorney fees. This could take years to resolve including mandated court appearances by her. The path of least resistance for all involved would be for her to sign off as you don't want to have to go to court either. Tell her all of this in the nicest way possible. This is in her best interest as well!

You and your Mother did her a HUGE favor for 4 years albeit illegal and now it is time for her to return that favor as you move forward to take care of your Mother. Play on her sympathies ........be nice as pie....just as she was when asking to be paid off the record.

After all you do have the checks and I'm sure there is proof that she did indeed work for your Mother. Did she take her to Drs appts? You must have witnesses to the fact that she was a paid employee.

Good luck.
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igloo572 Oct 27, 2018
Lucy - taxes are a 2 way street, elder needed to get W-9 & I-9 and file & pay FICA on the CG & CG needed to file income paid based on W-2. In home Workers are not contract labor (1099) for IRS rules. If state taxes needed, then file those as well. 4 yrs will have significant penalties. IRS might go for a 1 yr 1099 “I didn’t know filing” if you do old school style hand filing on your own taxes, but 4 years imo won’t fly. That’s the can of worms GuestShoppe posted on.

It could be said that CG did elder a HUGE favor being paid under the table as mom didn’t have taxes, fica etc to deal with.

There is no “private” anything if Medicaid is involved.
All the info submitting gets dovetailed into the states database. Applying for Medicaid allows the state to get an all access pass to the elders financial and medical past. If CG was on another “at need” state program, it can pose additional problems for the CG. If CG won’t sign a form, I’d bet it’s cause she is on another program (I’d guess SNAP) and she’s knows others who have had issues with unreported income surfacing & posing problems.
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You should put the rest of the money in a trust. The state of Texas even tells seniors to do that so that their entire account is not devastated.
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igloo572 Oct 27, 2018
GHardy - please please you really want to get clarification on TX Medicaid rules for compliance on trusts and asset transfers from a LTC Medicaid caseworker before you move $/assets.

Trusts can work if all assets placed into irrevocable trust 5+ years in advance of ever applying for Medicaid. And Trust needs to have assets that produce income (so has investments) to pay the costs for the trust to exist and continue to exist after the elder dies so that the beneficiaries can determine if Trust & assets in the Trust needs to defund or continue to exist. This to me needs real $$, real assets.... 800-1M+ range assets plus their home. Folks who have this type of $ & assets are not likely going to want to be in a NH with Medicaid beds stuck with the great unwashed. Their going to be in private pay only NH.

For SNT and Miller Trusts, state is going to require beneficiary to be the state should there actually be $ left after death.
Annuities have to be actuarial sound as per IRS tables
Irrevocable Trusts have to be cashed in.

If your getting any of this info at some type of seminar, please be cautious. Often things are touted as “Medicaid eligible”, that is not the same as “Medicaid compliant”......
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Medicaid is a joint federal and state program but is administered uniquely by each state and must be within overall federal guidelines for both “at need” medical and financial for all Medicaid programs..... whether it’s a WIC program for expecting mom or elder needing skilled nursing care LTC in a NH. The federal $ is based on the demographics of your states population & interdependent on census data. The state $ is based on just how much your state wants to dedicate $ to these programs beyond the minimum the feds require.

For LTC medicaid in a NH (skilled nursing facility), the daily room&board reimbursements paid to the NH & personal needs allowance that a LTC Medicaid resident can withhold from their required income copay is set by each state. Medicaid LTC daily R&B pays a flat rate, unlike private pay or Medicare post hospitalization rehab in a NH which can bill the resident by type of services used. Medicare has a pretty precise set of rehab codes used to pay the NH that is based on discharge orders.

$ 175 R&B & $50 PNA is overall average Medicaid R&B.

But it varies by state, for 2015 TX was #49 in lowest payment at $143.48 a day, only SD was lower at $133.74; then you have Alaska at $435.64 a day as #1, followed by DE at $356.69 for #2. Ditto for PNA too, like MN has a PNA of $115 a mo, while TX PNA is $60.

Billing office at the NH can tell you to the penny what your state Medicaid pays as daily R&B. What that amount is on the date of the filing of your mom’s Medicaid application is basically what the transfer penalty divisor figure will be should your mom face a transfer penalty placed on her application. Imho dealing with transfer penalty inquiry is not ever a DIY. Medicaid caseworker can have ?s that a dpoa can answer without an atty - I had 2 with my mom’s application that I was able to deal with - but $$ gifting transfer penalty imho needs atty.

if your mom still has 80k to spend down before needing to deal with the Medicaid application, it buys her & you time. You all need to get with a NAELA or CELA level of elder law attorney before the end of this year is my suggestion. If she just went into a NH, then she could file w-2 with fica needed on the amount paid to caregiver for this year/2018 taxes. Whether & how to do this is really to me what the atty can best guide you to do. Plus atty will have CPA he works with to do it all correctly. And then let the atty deal with the caregiver and then the atty shepherds mom’s Medicaid application in 2019.

If the amount paid under the table table was significant and your in a low reimbursement state, the days of ineligibility for LTC Medicaid could be beyond a budget buster for you as dpoa & family to ever private pay.
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In regards to "where did you get the $175 a day amount. I spoke to a Elder Care group in NY and said the amount was $10,300/mth, and that amount went down this yr. Now I am wondering if the amount is diff by State."

Nursing home "Room and Board" rates vary from state to state (the East and West Coast states being much more expensive than the Midwest states) and they vary depending on the amount of assistance the resident requires. Rates can vary from $150-- $250+/day for someone who needs "Supervision" with occasional assistance with ADLS (Activities of Daily Living, such as dressing, grooming, toileting , mobility, transfers & behavior issues), as high as $250--$400+ for someone who needs assistance with MOST or ALL ADLS or who has major behavioral issues.

As to your other issues, you need to talk to an Elder Care Attorney.
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Reply to DeeAnna
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Bet your not the first or last to do this - check around about how to do this
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Elder Attorney.
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Reply to RayLinStephens
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as igloo suggested, talk to lawyer. Filing and fighting with someone for 4 years retro may cost as much long term as penalty. You can prove person paid, but will they say it’s a gift or get their own lawyer...
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Reply to Guestshopadmin
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iggy, late tax filings will incur penalties and interest for mom as it’s been 4 years as employer and no filings. Big can of worms. Were expenses paid cash or check? Ugly if they hire atty for hardball and expensive.
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Moskop Oct 9, 2018
Expenses were paid by check.
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Your not going to like my suggestions, you could
- offer to pay whatever taxes the IRS is going to want from her for all those years she worked under the table. It maybe that 3-5 of you pay this so it’s gifting within the annual 14k irs rules.
However If she was getting some some type of other low income benefits - like Medicaid, SNAP, kids got free lunch, etc. - it may not be worth it for her to ever sign a form. It causes too many issues.
OR
- You just have to deal with a transfer penalty from Medicaid
OR
- You could hardball and this and file taxes for previous year(s) for your mom, and file w-2 on caregiver if you know her name and address and you as DPOA or get an atty to file a letter stating she wold not comply with a request to submit a W-9 & I-9 with documentation as to attempt to get them. An attorney or DPOA would have to do the W-9 & I-9 request (allow 5 weeks between each mailing) probably twice to her either via USPO certified mail with return registered receipt or via Fed Ex with signature required. Only after that can you do the late tax filing. So like 4 months from now to file taxes for past years, then deal with caseworker or his regional supervisor to get over penalty issues.

Now whether or not facility will let her stay there “medicaid Pending“ while all this happening is a whole other issue. If Medicaid has been applied for and the $ has already caused a ? from he caseworker, then her application has likely been red flagged for transfer penalty inquiry. NH probably will want her as private pay or dpoa signs a binding contract to be responsible for payment.

Medicaid nationally average is daily $175 Room&Board reimbursement.
So 50k gifting penalty = 286 days ineligibility.
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Moskop Oct 11, 2018
where did you get the $175 a day amount. I spoke to a Elder Care group in NY and said the amount was $10,300/mth, and that amount went down this yr. Now I am wondering if the amount is diff by State. I am going to have that answered.
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Get a lawyer to see if there is any possible way to get a good outcome from this. I hate to say it but this is one of the consequences of working outside of the law - you may be out of luck.
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