Updated: Oct 6, 2022
If you choose to hire a caregiver directly instead of working through a home care agency, you become an employer of a “household employee,” which brings with it several legal responsibilities. First, household employers should verify that their household insurance (renter’s or homeowner’s) covers household employees in case of an accident. It is also imperative that the employer be fully informed of the legal responsibility of paying taxes for household employees.
As the employer, you may also be responsible for withholding Social Security taxes, Medicare taxes and/or federal unemployment tax and filing them with the Internal Revenue Service annually or quarterly. Social Security taxes are owed by both the employer and the employee. Rules governing the amount(s) to be withheld and payment schedules can change annually. For information on paying federal taxes for household employees, call (800) TAX-FORM and ask for Publication 926 or view it on the web at www.irs.gov/formspubs/index.html [Scroll down to publication number 926.].
There are also state regulations. Some states require that employers pay state tax and/or state disability insurance. To find out the regulations in your state, call the state employment department listed in the government section of your local phonebook. The penalties for not paying taxes on household employees include paying the back taxes and paying interest and penalty fines.
There is one other requirement that every employer should know. Each employee is required to fill out an Employment Eligibility Verification form I-9 and a record of this should be kept on file. This form verifies that the person is legally entitled to work in the United States. The form can be downloaded from the web at www.irs.gov/formspubs/index.html or ordered by calling (800) TAX-FORM.
The Family Caregiver Alliance advises that household employers and employees stay informed and comply with state and federal tax laws. There are often local services available to seniors who need assistance in filing tax statements for household employees.