The simple answer is that a babysitter is NOT an independent contractor. A nanny, housekeeper, or home health assistant that you hire directly is your common-law employee. It doesn't matter how many hours they work, if the position is permanent or temporary, or how much you pay the worker. The first issue to be addressed is the classification of the caregiver as an employee or independent contractor for income tax purposes.
Before the employer can know how to deal with payments made to the caregiver, the employer must make a critical determination as to whether the caregiver is an independent contractor or an employee. This factor is problematic for the hired caregiver, but if most other factors indicate independent contractor status, the contractor should not tip the scales. It is very important that you clearly establish, before hiring the agency, that they are the employer. If the caregiver is an independent contractor, the employer must file a Form 1099-MISC and worry about possible liability for a work-related injury.
If you have already started paying a caregiver using the wrong classification, there are a few remedies that will be discussed later in this series. If the person receiving care is diabetic, their eating plan will be very different from that of a person who has no health problems. As another example, if light house cleaning is a necessary part of the job, it's essential to show the caregiver exactly what they would like to do and where the cleaning supplies are. In general, a homeowners insurance policy doesn't cover the caregiver for an employment-related personal injury.
Before hiring an independent caregiver, it's important to determine the level of care that an older loved one requires. By properly designating your senior caregiver as an employee during tax season, you can avoid future financial and legal problems. Having a newly hired employee makes the family the employer and, as an employer, there are certain tasks that one must complete. Be sure to ask about the agency's tax policies, some agencies will handle the taxes of their employees and others will only be responsible for helping care workers find employment.
The distinction between an independent contractor and an employee is crucial to complying with IRS regulations. When a decision has been made to hire an independent caregiver in the home rather than a home care agency, it is important to understand the definition of an independent caregiver and domestic employee according to the Internal Revenue Service (IRS). Typically, an independent contractor provides the necessary equipment and supplies, creates his own schedule, can hire other contractors to replace them, etc. This includes the employee's full name, social security number, address, gender, occupation, and regular hourly wage.
Federal and state fines may be imposed, and you may be responsible for the tax your caregiver didn't pay if you haven't filed tax returns.
