The term independent caregiver is commonly used to describe a home care professional who does not work for an agency. Most senior caregivers who receive a payment from the household, or from an external payment processor on behalf of the household, are employees, not independent contractors. The IRS has instituted new processes to find and penalize employers who misclassify a worker as an independent contractor when they actually are. A caregiver serving multiple clients may be an independent contractor if other factors, such as set hours, do not indicate superior employee status.
Services should be more than just de minimis services for several unrelated people. However, a caregiver who provides services to more than one person may be an employee of each of these people, especially if they are part of the same service agreement, such as a housekeeper who provides care services to your aunt. Many adult children strive to provide the support necessary for their parents to age in their own homes. At some point, this usually requires hiring a home health care assistant.
While many people choose to avail themselves of the service of a home health agency, others choose to hire an assistant privately. For those hiring privately, the question is whether the hired assistant is considered an employee or an independent contractor. The distinction is significant; however, it is not easy to make. Different labor and tax laws use different tests to determine if an assistant is an employee or an independent contractor.
Any home health caregiver who misrepresents themselves as an independent contractor will pay more taxes and will not be able to access potentially essential government benefits, such as unemployment insurance. Paying miles or food expenses for caregivers is commonplace, whether there is a relationship with an independent contractor or an employee. 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. And having them file as an independent contractor will disqualify them from certain government benefits, such as unemployment insurance.
In addition, if the caregiver is an employee and not an independent contractor, state law may require that the caregiver be covered by workers' compensation. To determine if an assistant is an employee or an independent contractor, courts use the control test and the economic and functional test. The fact that a caregiver or, for example, an occupational therapist who cares for provides services to the general public on a regular and consistent basis indicates a relationship with an independent contractor. 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 the employer is not sure if the caregiver is an employee or an independent contractor, the employer can obtain a Form SS-8 that determines the worker's status for federal employment taxes and income tax withholding purposes. In addition, misclassifying your elderly caregiver as an independent contractor means that you will be covered by workers' compensation insurance. Paying a caregiver as an employee can be more complicated and cost more than an independent contractor, but it's the right way to hire a caregiver who is employed based on the above testing criteria. While this bulletin applies only to home health agencies, it may provide clues as to how the Trump-era DOL will handle the irritating issue of whether to classify certain workers as employees or independent contractors.
Chances are the primary caregiver you hired is a domestic worker, not an independent contractor. The exception does not mean that they are automatically independent contractors, but rather that a less stringent test than the three-part test of AB 5 can be used to determine their status. Trying to pay someone as an independent contractor when they are actually employed is not legal and can lead to severe penalties for misreporting. .
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