Household Employee - Tax & Other Legal Obligations?

[scfr]

My mom has started using an in-home caregiver through an agency (mom is the employer). To help her stay on the right side of the law, I need to quickly research household employer tax & other legal obligations and make sure she (with a lot of help from me) has the proper procedures in place.

So far, these are on my list of things to look into and/or do:

• Read IRS Pub 926 (Household Employer's Tax Guide)
• Was an I-9 form completed? Is it my mom's responsibility or the agency's?
• I think Mom needs to get a FEIN - verify that, then complete the app
• Learn about the company the agency mentions will handle tax paperwork for "free" ... how do they make their money? (What I really want to know is, what's the catch?) Can mom sign up for this "free" service retroactively? If we decide not to use this service, what do we do?
• Social Security & Medicare tax (split 50/50 between employer & employee)
• Income Tax (employee responsibility --- but would it be better to have mom do withholding? Or maybe just ask caregiver if she is aware of the need to pay taxes, so she won't get an unpleasant surprise at tax time?)
• State Unemployment tax --- quarterly filings
• Worker's Comp? Does mom want to sign up? If not, would her homeowner's insurance offer any coverage?
• Make sure Mom understands the true hourly cost. Right now she knows the hourly wage the caregiver receives. But she's not factoring in the agency fee/commission, plus her tax obligations.
• Share information with sisters (in case I get hit by a bus).

Is there anyone on the forums who has dealt with household employees who can tell me if I'm missing anything?

[kork13]

Share information with sisters (in case I get hit by a bus).

It seems that you're looking at/asking the right questions. The tax service probably gets a portion of the agency fees. But i also wanted to say i really appreciate your macabre statement of sharing information. I use the exact same phrase, and while some don't share my sentiment, it's a great philosophy to ensure you're not a single point of failure.

[Like2Plan]

Sorry I don't know the answer to your question, but I do appreciate that you are sharing your information. We have not reached this level of care for my Mom, yet, but I have been wondering how that works. (Do any of the agencies that refer in home caregivers also do the payroll details, too?)
We were going to see if we can find someone to help Mom with house cleaning on a weekly basis. But, COVID delayed this.

[Fishindude77]

I used a caregiver service for my mom. The rate they billed me included all burden, taxes, workers comp. etc.
That's the benefit of using an agency, rather than hiring an individual.

Many people that hire individuals to do work at their homes, rather than going through agencies, do so to "cheat the system", avoid taxes, etc., saving themselves money and saving the employee from paying taxes.

[Like2Plan]

I used a caregiver service for my mom. The rate they billed me included all burden, taxes, workers comp. etc.
That's the benefit of using an agency, rather than hiring an individual.

Many people that hire individuals to do work at their homes, rather than going through agencies, do so to "cheat the system", avoid taxes, etc., saving themselves money and saving the employee from paying taxes.

Was the agency considered the employer in your situation--or did you (/your Mom) also have to file a schedule H?

[Fishindude77]

Was the agency considered the employer in your situation--or did you (/your Mom) also have to file a schedule H?

They were an employee of the agency.
I'd stay away from anything different than that.

[LivingAlmostLarge]

use an agency if you are woried. You only have to do the schedule H if you employ them yourself.

[scfr]

Thanks to everyone who shared their experiences, feedback, and questions.
I've spoken with the caregiver agency, with the payroll service/tax company, and with my mom, checked Pub 926, and have shared information with my sisters.

I think it bears repeating that my mom engaged the caregiver through an agency, but she is the employer.
Mom has now "opted in" on having taxes handled by the company the agency uses.
The fee paid to the agency includes payment to the company that handles the payroll & taxes, so she's paying for the service whether she uses it or not. The "catch" is that she had to opt in*, which she did not do when she signed up with the agency but has now done (and without too much fuss because the caregiver has only been out to the house 3 times).
The payroll service company will pay quarterly taxes on my mom's behalf and send her a fully completed Schedule H at the end of the year with instructions how to include it with her tax return.
The additional expense that she will now have is her half of SS & Medicare, and state unemployment insurance.
Her true cost is 30% higher than the gross hourly rate the caregiver gets, and I'm pretty sure Mom decided the number of hours based on the caregiver's hourly pay. But now she knows the true cost --- I went over it on the phone with her and sent an Email so she can read it later --- she has the information she needs to make an adjustment to the number of hours if that's what she needs to do.
The agency says they check employment eligibility before they onboard caregivers.
Mom does need to get a FEIN, but the when she signs up for the service the agency will handle that application.
They don't provide worker's comp insurance, so Mom needs to make a call to her homeowner's insurance company and I need to follow up to make sure she has done that.
And I need to check at the end of the year to make sure she gives the Schedule H and estimated tax information to her tax preparer.

*I don't have any reason to think the agency hid the opt in or made it difficult. Knowing my Mom, she probably said "let me think about it" and then decided to forget about it.

[Fishindude77]

Sounds like a complicated arrangement and whole lot of hassle, just to hire a simple service. The outfit selected is keeping their charges a little lower by burdening mom with some of the employers typical responsibilities.
Find a solid company that takes care of all of this stuff and just sends you a monthly bill for the services.

[myrdale]

Many people that hire individuals to do work at their homes, rather than going through agencies, do so to "cheat the system", avoid taxes, etc., saving themselves money and saving the employee from paying taxes.

This applied to my mother. She is a nurse who went on disability. To bring in some extra income, she did some home nurse work under the table. It really wasn't much more than helping the man's wife to the bathroom and bed, washing couple loads of laundry and feeding the dog from what I understood. Something like $80 a night, two or three nights a week.

Should she have paid taxes? Sure. Did she have insurance? Nope. What would happen if Mom slipped and hurt herself? What would have happened if the old lady slipped and hurt herself?

Where is the moral line for what constitutes taxable income?