My mother (90) is in need of a senior caregiver at home. She lives in Ohio, we are in Oregon. Can I pay the wages directly?

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I know we need to set up an EIN for payroll, pay and withhold Social Security and Medicare and obtain worker's comp for the caregiver. We want to make it simple for Mom and since we will be funding this how can we best handle the situation? We are considering using a payroll service but don't want to have to send extra money to Mom for the purposes of paying the caregiver if it comes out of her bank account. Can we set up a bank account in her name and for her benefit, but entirely under our control for the sole purpose of paying her caregiver? We also want her to receive the Schedule H and any possible tax breaks.

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DO NOT USE YOUR OWN MONEY!
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Thomas wrote:

"if you hire an independent contractor, get a rider on your homeowners insurance policy to cover that person when on your premise, and hire an accountant to prepare the necessary reporting requirements. "

This may be possible in the state in which you live, but in Michigan, workers, whether independent contractors or employees paid by the cared for/caregiver, are NOT covered under homeowners' insurance. These are considered commercial liability issues. Employment of caregivers is not a homeowner issue; it's a commercial issue since the family puts itself in the position of becoming an employer.

When i investigated this issue with my insurance agent, I learned that we would have to purchase a commercial workers' comp policy, at a cost of $750 - $1000 annually, and could expect the premium to rise every year.

If the person was injured and filed a claim against the policy,...well, it's exactly the opposite of the gift that keeps on giving. It's a liability that could continue for years.

I spoke with friends in business for themselves, and was strongly advised not to go this route for a caregiver, including b/c of the possible long term exposure.

So anyone considering the independent contractor route, or even getting a EIN to pay an employer, needs to seriously evaluate the issue of an injured worker and short and long term liability.

It was this very specific issue that convinced me the only safe way to hire a caregiver is through an agency. I wasn't interested in being exposed to liability if someone was injured, whether that someone was working as an independent contractor, "under the table", or as a direct employee.
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I would do as suggested, use a payroll service familiar with the laws of the state and consider the employee a W-2 employee not an independent contractor since you cannot specify the duties of an independent contractor. With regards to workmen' comp, at least in Texas, my regular insurance agent was able to help me secure coverage for my household employee. The IRS has a handbook for household employers and you should read it and also follow the instructions in the handbook with regards to your state unemployment insurance.
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Why not hire someone through a home care service? I'm two states away from my folks and I checked out several local companies and found one that is great. No worries about comp., taxes etc.
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Save yourself a lot of headaches and use a payroll service. Federal, state and possibly local taxes need to be done. You can tell them which bank account to withdraw from and set up a separate payroll account. Be sure the caregiver has a written contract compliant with Ohio domestic workers' law. Be sure workmans' comp is covered. As for tax breaks, the care must be ordered by an MD to be deductible. talk to a CPA in Ohio.
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