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What's Wrong With Hiring My Senior Caregiver as an Independent Contractor?

Leanne Proctor
May 23, 2018

Learn why senior caregivers don't meet the independent contractor criteria and how to file taxes for household employees.

The senior caregiver you've hired is a household employee, not an independent contractor. Here's why:

"Senior caregivers are classified as employees and don't meet the independent contractor criteria; therefore, the employer must administer the payroll and tax process, withhold the taxes correctly and remit them to the government," says Tom Breedlove, Sr. Director of Care.com HomePay.

It may seem easier to have your senior helper file a 1099 as a contractor, but because they are your employee, your incorrect filing will be considered tax evasion by the IRS. "If you misclassify your senior caregiver, you are subject to tax evasion charges, and that comes with back taxes and penalties that everyone wants to avoid," Breedlove says.

It will also be worse financially for your caregiver to file as a contractor. They will end up paying more taxes at the end of the year because independent contractors are required to pay self-employment taxes. And having them file as an independent contractor will disqualify them from certain government benefits, such as unemployment insurance.

Still looking for help? Find a senior care aide for your loved one.

Comparing Household Employees and Independent Contractors

"The difference between an employee and an independent contractor hinges on control in the workplace," Breedlove says. "An employee is someone who doesn't have control of their work environment and therefore reports to and works for someone else."

You have an employer-employee relationship with your senior caregiver, meaning that you are in control of how they spend the day with your parent or elderly relative. They take your loved one to run errands, help them get ready for the day, administer their medication and handle any issues that come up -- all based on your strategies or the advice of a physician. Together, you are a team, but ultimately you call the shots. And as an employee, they come to your home (or your senior's home) and use any necessary supplies provided there.

Defining Independent Contractors

An independent contractor, if classified correctly, has complete control of their work environment. They set their hours, set their place of work, set their rate of pay, typically offer their services to the general public and, most importantly, are fully responsible for the administration of the payroll and the tax process.

An independent contractor is hired to perform a job or service for an individual, but that person has no control over the details of how the services are performed. Generally, an independent contractor provides needed equipment and supplies, creates their own schedule, can hire other contractors to fill in for them, etc. Also, contractors don't work regularly for the employer; instead they are hired on an as-needed basis.

Filing Taxes for Caregivers Hired Through Agencies

If you hired someone through an agency, it's important to ask the agency if they file taxes for their caregivers or if you are responsible for doing so. Many agencies have an employer-employee relationship with their caregivers, therefore they handle the filing. But some agencies only act as a middleman and don't handle this type of paperwork. Discuss the tax policy with your agency during the hiring process, so you don't have to worry come tax season.

If you do your own search and hire a caregiver who isn't associated with an agency, then you are fully responsible for filing household employee taxes for them.

So classifying your caregiver as an employee leaves the IRS happy, keeps your family out of potential legal trouble and reassures your caregiver that you have their best interests at heart. Plus, if you ever need to part ways, you're creating a safety net for them with unemployment insurance. After all, they are an important part of your family and you want to make sure they are taken care of, just as they take care of your loved one.

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Comments

I would like to know if a shift 4pm to 9am for a dementia patient daily, is required to pay overtime?

I don't believe the description for independent contractors are accurate.  I've been an independent contractor but in another capacity.  The hiring entity has a statement of work, I bid for the work along with basing my cost proposal on hourly rates or on deliverable basis, and they select a provider based on whatever factors they deem pertinent.  In their statement of work, they indicate where the work is to be performed, amount of hours that can be worked, the hours of operation (i.e., hours during which I can bill), etc.  If being an in home care-giver is the same thing, then there is absolutely no reason why an in home care provider couldn't be classified as an independent contractor.  

User in Escondido, CA
Feb. 10, 2017

I took care of an elderly couple as a live-in caregiver, and fixed their meals, gave them their medications and drove their automobile where ever they asked to go. According to the IRS definition and other caregiver sites, I was an employee, but they never gave me anything but personal checks to cover the number of 24 hours days I spent caring for them. Their attorney sent an IRS form 1099-MISC for me to file with the IRS. They didn't withhold federal or state taxes nor SS and medicare taxes. I plan to write a letter to their attorney who's in another state and ask them to send me a W-2 and to pay their share of the taxes owed. If they fail to comply, what are my alternatives? 

User
Aug. 27, 2015

That a contractor was properly licensed was important to the Fords because it was a condition for their receipt of funds.

Tom Breedlove
April 15, 2015

Hey Kim. I'm sorry to hear you've just now learned about these tax responsibilities. There is a way to catch up on the taxes that should have been withheld from your mother's caregiver, but it will take a bit of work. Care.com has a great article detailing the steps you should take. (https://www.care.com/homepay/l...) If you're interested in HomePay taking care of all this, we're happy to help as well. Feel free to reach out and one of our team members can go over your options.

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