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Private Caregiver Hiring and Tax Rules

All Heart Home Care San Diego Senior Fraud

Home care provides the support necessary for the elderly to stay in their home instead of being forced to move into an aged care facility.  The assistance that home care provides can include help with cooking meals, cleaning, bathing, dressing, exercising, housekeeping, medication reminders, assisting with transportation assistance and much more. Home care allows seniors to enjoy their independence and freedom that living at home brings.

When the family is thinking about hiring a private caregiver or home care agency, their thoughts inevitably drift towards the financial aspects of the decision.  Questions about the cost and tax arrangements involved when using caregivers are common.  To help answer some of these questions, this article will take a look at the different types of home care available and private Caregiver hiring and tax rules involved.

The Key Differences Between a Private Caregiver and a Home Care Agency

A private caregiver is an individual who is hired by the family to look after their loved ones.  The skills of the individual can vary greatly, with some private caregivers having minimal training while others have college degrees and nurse training.   There are many factors to consider when hiring a private caregiver to come into your home.  In addition to being covered with the required insurances, families are also responsible for inspecting resumes, verifying credentials, contacting references, and performing background checks.   A home care agency will take the headache out of finding a qualified and reputable caregiver for your family.

A home care agency is an organization that employs caregivers and a variety of support staff.  The agency’s staff works together to provide home care for many different clients.  The kinds of staff that work for a home care agency may include caregivers, certified nurses (CNA), home health aides (HHA), licensed vocational nurses (LVN), and registered nurses (RN).

Some of the advantages of using a home care agency include:

  • There are many reputable home care agencies available
    Your family can find an established company with solid credentials, a lot of experience and a great reputation.
  • All staff and caregivers have their credentials independently verified
    Staff and caregivers who work for a home care agency have undergone a rigorous screening process. They have had their credentials, references and criminal background checks verified.
  • They continually receive training
    Home care agencies have a vested interest in training their staff to provide better service to clients.
  • Home care agencies carry proper insurances
    All staff are fully insured and home care agencies must carry worker’s compensation insurance, professional liability insurance, and surety bond insurance.
  • There are multiple caregivers available
    Because home care agencies have multiple caregivers, you will always have a caregiver available. If your regular caregiver is ill or goes on vacation, the agency will provide you with another caregiver.  You can choose which caregiver you prefer and there are many to choose from.
  • Home care agencies constantly evaluate their staff’s performance
    They have a number of measures in place to ensure staff are working well and looking after their client’s needs.

Tax Rules to Consider When Using Home Care

When a family uses a home care agency to provide care giving services, the tax arrangements are fairly simple.  The business handles all employee taxes and insurance issues.  The home care agency also has a responsibility to supervise their staff and ensure that services are adequately provided.

The tax rules surrounding the use of a private caregiver can be much more complex.  The IRS considers a private caregiver to be an employee if they earn more than $750 a quarter or $1,900 a year.  If they earn above that threshold, the family must register the employee with the IRS and pay the appropriate taxes — which may include unemployment, social security and payroll tax.

The time required dealing with the additional paperwork and extra payments can add a substantial amount to the cost of hiring a private caregiver.

Even when families are organized enough to register the private caregiver with the IRS, they often do it in the wrong way — registering the employee as an independent contractor.  When this is done, the tax burden is pushed onto the employee.  If the employee is unaware of that mistake, you both might run into trouble with the IRS at a later date.

Beware of private caregivers who say they are independent contractors, as it is more than likely that they do not meet the legal requirements to be one.  If that occurs, the IRS will usually put the tax burden back onto the employer, potentially costing your family thousands of dollars.  In some cases, the IRS may also prosecute your family and seek large fines.

Another complex matter when dealing with private caregivers is managing payments for overtime.  Any caregiver that works more than 45 hours a week must be paid overtime at a rate of time and a half.  If your family does not carefully track and pay overtime, they may be exposed to a lawsuit in the future.

When deciding between a home care agency and private caregiver, it is important to consider all of the potential aspects — including taxation.  When financial matters are examined more closely it’s easy to see that employing a private caregiver can become very complex and costly!

If you are interested in learning more about private Caregiver hiring and tax rules or the exciting non-medical home care services available at All Heart Home Care, contact us today at 619-736-4677.  We offer free in-home consultations and can explain all of the benefits obtained from using our home care services!

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