Once a self-employed caregiver has been hired, it is first necessary to know the payment period, that is, the start and end dates for which an employee is paid. Payment periods can be weekly, every two weeks or once a month. The date on which one is paid is called payday. For each payday, the amount in which an employee is paid must be disclosed to federal and state agencies such as the Social Security Administration and the Internal Revenue Service. 3. Get workers` compensation and disability insurance. This insurance protects both the employer and the employee in the event of an injury. For example, if a self-employed caregiver is injured on the job, this type of insurance covers medical expenses and lost wages. Most states require employers to purchase workers` compensation insurance. To find out which states require this type of insurance, click here.
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 manage payments to the caregiver, the employer must make a crucial decision about whether the caregiver is an independent contractor or an employee. As an employer of an independent caregiver, payroll management can be challenging. It includes calculating hours and wages, reporting payments to federal and state agencies, withholding and paying Social Security, Medicare, federal and state income tax, and federal unemployment tax. For each tax and withholding tax, a complicated formula must be followed. Most older caregivers who are paid directly by the household or by an external payment processor acting on behalf of the household are employees, not independent contractors. The IRS has introduced new processes to find and punish employers who incorrectly classify an employee as an independent contractor if they are truly an employee. See supervision contract forms of employment contract here. The new regulation of home care agencies means greater reliability for family members who entrust them with the provision of services to the elderly, but the costs of compliance will undoubtedly be passed on to consumers. While some consumers have long-term care insurance, most will end up paying privately for home care. As a result, the financial temptation will be greater than ever to hire individual caregivers for less than it would cost to hire a home care agency, eliminating the middleman.
If the employer does not know if the caregiver is an employee or an independent contractor, the employer can obtain a Form SS-8 that retains employee status for federal labour tax and income tax purposes. Once a self-employed caregiver has been hired, an employment contract (also known as an employment contract) must be signed. This is a written agreement that should include the following: If the caregiver is an employee and not an independent contractor, state law may require the caregiver to be covered by workers` compensation. In some states, failure to compensate workers is a criminal offence. If the caregiver suffers a work-related injury, there may be a liability on the part of the employer, the landlord and the person with a disability. In general, a homeowner`s insurance policy does not cover a caregiver for employment-related bodily injuries. Consider, for example, the situation where a caregiver tears an intervertebral disc while lifting a disabled person. The situation may not be covered by the owner`s insurance policy, and the employer, landlord and person with a disability may conclude that they are personally liable to the caregiver for the bodily injury. This type of responsibility can be significant. In summary, if the caregiver is an employee, the employer has the responsibility to withhold income taxes, pay Social Security and Medicare taxes, pay federal and state taxes on unemployment, and file various salary forms, including Form W-2. In addition, the employer may be responsible for the compensation of employees. The employer must also verify that the caregiver is a U.S.
citizen or a person who can legally work in the United States. If the caregiver is an independent contractor, the employer must file a Form 1099-MISC and address potential liability for a work-related injury. Any trustee of a special needs trust who employs caregivers for the beneficiary of the trust should contact a tax professional if you have any questions regarding compliance with these responsibilities. So if caregivers help Dad four hours or more a week at a rate of $15 an hour, Dad will exceed the $750/a-quarter threshold and will likely be considered an employer. There are many ways to find an independent caregiver. Ask your friends, neighbours, senior centres, churches, the primary care doctor for the elderly, and social workers if they know of an elderly caregiver looking for a job. Search for and/or publish the position on online job boards, such as . B Craigslist.org, or search/place an ad in the classifieds section of your local newspaper. Another great resource is to contact your local aging agency (AAA) and ask if they know of any elderly caregivers in the area where you live. Click here to find the AAA near you, or use a Part 3 service to find an independent caregiver.
In California, a home caregiver is likely to be classified as an employee because the family typically has control over the work environment, including the caregiver`s schedule and rate of pay. Under California and state law, there is an employment relationship in which the family has control or the right to control what tasks the caregiver is required to perform and how those tasks are performed. Unlike an independent contractor who has the right to control their schedule, place of work and often their rate of pay, the caregiver a family hires is generally not as independent. Even if the family signs an agreement with the caregiver who agrees to be an ”independent contractor,” the courts look beyond written agreements to determine the circumstances of the relationship to determine the correct classification. Before hiring a self-employed caregiver, it is important to determine the level of care an elderly loved one needs. Take, for example, an elderly person who lives alone and needs camaraderie, light cleaning of the house and help with shopping, compared to a person with Alzheimer`s disease who lives with their adult child. This person may need medication and intensive care five days a week for their primary caregiver to work. These two people need very different levels of care and nursing activities. Self-employed caregivers are considered domestic workers and domestic workers are considered non-exempt employees. This means that they are subject to the directives of the Fair Labour Standards Act (FSL).
The RSA is a federal law that sets the minimum wage and requires overtime to be paid for those who work more than 40 hours per week. Family members or related caregivers are not exempt from this law. For many years, the determination of who is an employee and who is an independent contractor was governed by a judgment rendered by the Internal Revenue Service in 1987 (Rev. Rul. 87-41). Twenty factors described in the IRS decision form the basis for determining whether a caregiver is an employee or an independent contractor. The elements can be divided into three broad categories: financial control, control of behavior, and the nature of the specific relationship. Assess the relevant factors listed below in light of the agreement with the caregiver to determine the degree of control of the hiring party over the hired caregiver. While the IRS ruling contains twenty factors, we leave three at the end of the list that we do not think apply to a foster family.
A caregiver who provides services to multiple clients may be an independent contractor if other factors, such as . B fixed hours, do not indicate a higher employee status. Services must 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 one of these individuals, especially if they are part of the same service agreement.B, that is, a housekeeper who provides care services to your aunt. In 2013, the Legislature enacted the Home Care Consumer Protection Act, which is now codified in Sections 1796.10 through 1796.63 of the California Health and Safety Code. As of January 1, 2016, the law requires ”home care agencies” to be licensed by the California Department of Human Services. Agencies are only allowed to use licensed ”home care assistants” to provide services to clients and must classify them as employees rather than independent contractors. .