In most cases, the answer is yes! Families seeking home care for their loved ones are often faced with a bewildering number of choices; one major decision families navigate is whether to hire a caregiver through a home care agency or to hire an independent CNA or HHA. Affordability is one of the primary reasons that families hire a private duty caregiver, avoiding the often exorbitant costs of an agency. A private caregiver independently negotiates their care giving services directly to families instead of through an agency or clearing house. Most families find that privately hired CNAs (certified nurse assistants) and HHAs (home health aides) are highly qualified and less costly, helping to stretch their home care dollars.
Yes, this is a distinction that needs to be made when hiring! It matters because the IRS almost always takes the view that your in-home caregiver is a household employee, which makes you the employer. There has been a lot of controversy, confusion, and ambivalence centered on whether in-home caregivers are employees or independent contractors. This has led the IRS to create some strict regulations in recent years on tax liabilities regarding household employees. Yes, your private in-home caregiver hired to care for Mom or Dad is a household employee in the eyes of the IRS. A caregiver who works in your home that you pay more than $2000 per year (2017) means tax obligations for your family. As a rule, you are the employer when you hire a caregiver privately to care for the day-to-day needs of your loved one. Unless the distinction is made that the caregiver is hired as an independent contractor, you as the employer are responsible for an increased number of responsibilities including paying taxes and filing IRS paperwork.
Generally, the IRS says the person receiving the care (or their spouse) is the employer. When the elderly client(s) is not capable of directing the caregiver then an adult child or other family member will become the employer. The employer is responsible to control not only what work is done but how it is done. Refer to Household Employers Tax Guide.
Unless the distinction is made upon hiring and signing of contractual agreement, the answer is almost always never. Some people prefer not to have the extra responsibility of being an employer and choose outright to only hire an independent contractor. The independently contracted caregiver is a certified CNA or HHA, carries liability insurance, pays workers compensation, and pays self-employment taxes (Social Security and Medicare). They also have complete control over scheduling and all aspects of home care. The IRS does make an exception stating "In some cases the caregivers are not employees. In such cases, the caregiver must still report the compensation as income of his or her Form 1040, and may be required to pay self-employment tax depending on the facts and circumstances." Keep in mind there are a multitude of factors to consider for both employers, employees, and independent contractors: state and federal wage laws, on the job accidents as it relates to liability and/or home owner's insurance, "right-to-work" laws, etc.
The tax laws are somewhat complicated and can be costly if you make a mistake. As the employer, you must pay Social Security and Medicare taxes, withhold income taxes, and pay federal and state unemployment taxes. You are also responsible to pay workers' compensation and file a W-2 for your caregiver. Employers should write up an agreement that details the caregiver's work schedule, hourly pay rate, and overtime or holiday pay. Since often being an employer is a job in itself, delegate payroll management to another family member not tasked with day to day caregiving duties. If it is just too much for the family to be tasked with you can also hire a household payroll specialist or accountant for these duties. Refer to Family Caregivers and Self Employment Tax for more details to avoid making costly errors.
For some it may be very practical while others will find it a daunting undertaking when already encumbered with family caregiver responsibilities. Hiring a caregiver through an agency might start looking a lot more attractive when compared to managing payroll, taxes, and insurance matters. However, as the employer you will have a great deal more control with the selection of caregivers and care of your loved one. Cutting caregiver costs is huge because private hires are considerably less than through an agency or even through an independent contractor. To be fair, the more overhead there is the more that cost is passed along to the families needing care. An agency must cover the costs of office rent, franchise fees, office staff, bonding/insurance, etc. Even an independent contractor has to inflate fees to cover transport, insurance, and taxes. As the employer, you will free your caregiver of many worries associated with working as an independent contractor (taxes/insurance) or through an agency (lower pay, fluctuating hours). Your private hire will earn more pay and that will improve job satisfaction and reliability. The overall goal for home care is hiring qualified, caring individuals with minimal caregiver turnover so that your elderly loved one gets devoted, quality care.
I have observed over many years while working as a home health nurse that certain personality types are better suited to managing private caregivers. A "take charge" leader type of person is required on the part of the employer. While being too bossy and micro managing is not welcomed by caregivers, showing support and respect goes a long way. More controlling folks seem attracted to hiring private caregivers because it is their nature. However, at the same time, it is important that they are team players and highly regard their employee caregivers. Attention to detail and good communication enhances the work relationship as well. Don't forget to outsource the tax/paperwork burden if necessary to a qualified third party! Certain situations might require diplomacy and even heightened sensitivity to a caregiver's needs. However, I caution too much involvement with personal problems as it can be recipe for disaster. It's easy to get overly enmeshed in a caregiver's personal life; after all, he or she is in your home every day caring for your loved one and often become like family. I have found that the best employer-employee relationships tend to find a good balance of mutual respect, understanding and thoughtfulness.
Clare Absher is a Registered Nurse with 45 years of experience. Most of her experience is in home health serving as a caregiver, educator, patient advocate, and liaison between families and community resources. She has also worked in acute care, assisted living, and retirement settings. She is passionate about helping families care for their elderly loved ones at home.
