Elder Care Hiring: Employee or Independent Contractor

The IRS is increasing its focus on improperly classified domestic workers, including those hired to as senior home care professionals.

An adult 18 years of age or older who works in your private home and to whom you pay more than $1900 in cash wages (as of 2014) per year is subject to payroll tax obligations.  Distinguishing between an independent contractor and an employee is crucial to remaining in compliance with IRS regulations.

When is a home care worker an independent contractor?

In general, a worker is presumed to be an employee except in situations where the family paying for services can demonstrate the worker's true independence.  Here are the required conditions under which a worker can be considered an independent contractor where the employer is not responsible for payroll tax obligations:

• The employer must be able to prove that the worker performs services that the employer does not have the right to direct.

• The worker must maintain an independent business enterprise, including a workspace, outside the employers domain, with his/her own insurance.
  
  
• The services provided by the worker are outside the household’s usual course of business (i.e., work that is distinguished from the day to day operation of the household, such as carpenters, roofers, etc.)

Most elder care workers who are paid directly by the household, or by a third party acting on behalf of the household, are employees of the household, not independent contractors.  The IRS has instituted new processes for finding and penalizing employers who improperly classify a worker as an independent contractor when he is really an employee.

Senior home care employer responsibilities

Generally, a senior home care worker who is hired to care for the day to day needs of an aging adult is an employee.  As such, the employer is responsible for employment taxes, recordkeeping and required insurance matters. This is true of most elder caregivers you hire privately, and also those senior HOME caregivers you hire with the assistance of a registry service.

Download the free guide to privately hiring elder care workers for more information on the requirements for tax, payroll and record-keeping requirements.

Other Resources:

Companionship Care: Minimum Wage and Overtime by State
Overtime Rules for Senior Caregivers
Payroll for Privately Employed Senior Caregivers
FAQ: Privately Employed Senior Caregivers