Page 74 - August 2016 Life In Naples Magazine

FINANCE

CAREGIVERTAX RULES OF HIRING A

by Michael Wiener, E.A. employer must withhold federal income tax
• Keep good records
P eople hire others to work in their homes all the time. • Obtain an Employee Identification Number (EIN)
They hire babysitters, housekeepers, private nurses, • Give a Form W-2 to the caregiver or household employee
nannies, or yard workers to help take care of their
families and their homes. Many people do not realize that even at the end of the year. Also, be sure to send copy A (Form W-2)
though these people are working in their private home, the to the Social Security Administration.
government has instituted tax rules that apply to these situations.
The tax rules surrounding the employment of a caregiver can be • File Schedule H (Form 1040) with the employer’s federal
confusing, not to mention costly, if a mistake is made. income tax return (if he or she does not have to file a tax return,
then file the Schedule by itself )
The first thing a person needs to determine is if the caregiver
is a household employee. If someone is hired to care for a family It is in the employer’s best interest to pay the household
member and is told not only what work needs to be done, but employee through legal means. The immediate costs may be
how the work is done, then that person is considered a household increased, but it may be possible for many of the costs to be
employee. It does not matter whether the work is full-time offset through tax breaks.
or part-time, or if the worker was hired through an agency or
association. It also does not matter whether the worker is paid If you should have a topic that you would like me to
discuss or if you should have a question, please feel free
by the hour, daily, weekly, or on a by
the job basis. to call 239.403.4410 or e-mail me at
mike@cctaxandaccounting.com.
One of the biggest mistakes
people make when hiring a An enrolled agent, licensed by the US Department
caregiver is assuming they don’t of the Treasury to represent taxpayers before the IRS
have to pay taxes if they pay the for audits, collections and appeals. To attain the enrolled
caregiver in cash. This way of agent designation, candidates must demonstrate exper-
thinking is not true. If a caregiver tise in taxation, fulfill continuing education credits and
earns more than $750 per quarter
or more than $1,900 a year, the IRS adhere to a stringent code of ethics.
considers that person a household
employee and taxes must be paid
accordingly. Failure to pay the right taxes can result in fines and
penalties. Another common mistake people make when hiring
a caregiver is hiring a person who is not a legal resident of the
United States. Remember, it is unlawful to knowingly hire or
to continue to employ a person who cannot legally work in the
United States.
Once a caregiver is hired on a regular basis, the employer and
the employee must complete the United States Citizenship and
Immigration Service Form I-9, no later than the employee’s first
day of work. After hiring the caregiver, the employer must also
perform additional tasks:
• Find out if he or she needs to pay state taxes
• Withhold Social Security and Medicare taxes
• If the employee requests that he or she does so, then the

74 Life in Naples | August • September • October 2016