We took a difficult call recently from an adult daughter of an elderly couple who employed two senior caregivers. The Smiths live in New York
Here is the story….
Dad Smith was diagnosed last year with dementia and Mom Smith needed some help around the house and someone to be with Dad when she had to go out. The primary concern was to keep Dad safe at home as long as possible. They hired two senior caregivers to provided needed support. It never occurred to Mom and Dad that they just became employers and with that came specific tax and legal responsibilities (Unemployment taxes, Social Security and Medicare taxes and Workers' Compensation to name a few).
Fast forward 6 months and Dad's health is declining. Moms needs more help. The daughter moves in to help her parents. She was horrified to discover that the two elder caregivers have been stealing from the family. Cash, jewelry, silver and few little things here and there that no one would notice unless you were looking.
The Smiths decide not to press charges and just let the senior caregivers go.
All is good in the Smith's world again. That was until the previous week then they received a letter from the NY Unemployment Office. You see, the two employees who were fired have now filed for unemployment and listed the Smiths as an employers for 6 months. However, the unemployment office had no record of the Smiths having an unemployment account or paying taxes for that 6 month period.
The daughter is going the scheduled hearing next week. She is hoping to be able to explain the situation and that New York State will not assess all of the taxes, penalties and interest that they could.
I had to break it to Ms. Smith that this is only the beginning, because there is more. They owe Social Security and Medicare taxes for the two employees and they should have had a workers' compensation insurance policy (my experience from other clients is the NYS penalties for not having workers' compensation coverage is very heavy handed). Her parent's tax returns for 2013 will need to be amended and W2’s given to the employees. Household employment taxes are complicated, and when you are behind in your filings it can be overwhelming.
Ignorance is so not bliss when it comes to household payroll taxes. My advice to the daugher was, now that you know, we can help you reconstruct that time period together and figure out what the total tax obligations are. It’s better to fix it now than to wait for them to find your parents as interest and penalties will continue to increase over time. NYS is one of 20 states in partnership with the IRS to help identify unpaid/uncollected employment taxes - it is just a matter of time.
Unfortunately, this is not the first client we have helped get out of this awful, stressful situation. But HWS is here and we routinely help our clients get back on track.
Household payroll taxes, it’s what we do. All day, every day. And while this is one of my least favorite situations to help fix, it’s also the most rewarding because I can do the heavy lifting sorting out the tax obligations and dealing with the paperwork, offering these client real solutions.