If you decide to employ in-home carers directly, you will be an employer, bound by the employment laws and taxes of your state. This may include accumulation of sick pay, required breaks, overtime pay and other items, as well as the laws and requirements of the federal government.
We have compiled essential information so that you can understand the requirements and responsibilities of being an employer with caregiving employees.
Be Sure You Follow State and Local Tax Laws
Care.com has assembled a directory of all the states’ laws and taxes. This sounds like a lot, and it is initially, but it becomes much easier over time. Some people are tempted to pay in-home carers as independent contractors via 1099s—not deducting taxes from employees or paying employer taxes. However, the federal government has been consistently determining that in-home carers must be treated as W-2 employees (Source: Care.com).
Following tax and labor laws in your state may feel burdensome, but not following them is risky. Certain lawyers are making a living going after household employers for “wage theft” and other violations of state laws. Having followed the law and having good records are your best defense against such claims. If you have paid your home caregiver under the table, in cash, or otherwise “outside of the system,” you make yourself vulnerable not only to lawsuits by your carers and attorneys but also to fines from state and federal government.
Creating Personal Care Agreements
We recommend that you have a written agreement with your carer employee. This is particularly important if the carer is a member of the family.
A written agreement will not only clarify expectations, but also be useful if later applying for Medicaid. Without the written agreement, Medicaid may regard the money paid as a gift which may affect eligibility.
If a geriatric care manager is helping you, they may have an agreement form that they like to use. The Family Caregiver Alliance has detailed the elements of a good caregiver agreement, which includes a discussion of hiring family members as caregivers. The American Council on Aging also provides useful information.
There are sample agreements available online, as well.
Performing Background Checks is Essential
If you hire someone through an agency or with the help of a geriatric care manager, verify that a background check has been done and what the background check consisted of. If you are hiring them directly, we strongly advise you to do a background check, either yourself or by hiring others. The Family Caregiver Alliance has compiled a detailed resource on background checks.
At minimum you should check at least three references, two of which should be previous employers; see a photo identification card and if the person will be driving on your behalf, their driver’s license (verify with the DMV the validity and their record); and verify credentials, if any. Criminal and credit background checks are also advisable.
There are many services available online to perform background checks for in-home caregivers, one of which has produced a good overview. Costs generally vary from 10 to 100 dollars, depending on the extent of the check.
This process can seem daunting, which is why it may make sense to engage the professionals. Conducting a background check is really important though, as the carer will be in your home and will be responsible for a vulnerable person.
Managing Payroll
If you are an employer, you will need a federal Employer Identification Number (EIN) and, in some states, a state EIN. You can apply yourself, or some payroll services will help you get them. The Small Business Administration has a guide to getting federal and state EINs yourself.
There are many payroll services available, and some specialize in home care, such as MyHomePay.com owned by Care.com. Others, such as Surepayroll owned by Paychex, or Gusto, cater to both private employers and small businesses.
In general, payroll services charge a flat fee per month and then for each employee. They may levy additional charges for certain reports. Be sure to get the complete schedule of charges before you sign up.
The best payroll services offer the following features:
- Direct deposit payments
- Payroll tax filing and payment
- Employee self-service and self-onboarding
- Basic reports
- Automatic compliance updates
- Generate year-end W-2s
- Calculate overtime and tax deductions and
- Comply with state and local labor laws
You will need to file Schedule H if you paid wages to a household employee as part of your form 1040 federal tax return. As mentioned, consult your tax advisor as to the potential deduction of direct care giving expenses.
All this can sound daunting, but once it is set up, it really can work rather smoothly. One of the major advantages of hiring a home caregiver directly is that there is no agency taking as much as 50% of the hourly wage you pay your carers.
Whether you use an agency or hire an in-home caregiver directly, either approach works, and both have pros and cons. Take the time to research the kind of help you need, so you can make the choices that make the most sense to you.
