Dec 19, 2016
by Estate Planning and Elder Law Attorney Rick Law, senior advocate and elder care attorney at the multi-generational law firm of Law Elder Law in Aurora, IL.
The Internal Revenue Service has special rules that apply specifically to workers (caregivers) who perform in-home services for elderly or disabled individuals.
Because caregivers generally work in the homes of the elderly or disabled individuals and these individuals have the right to tell the caregivers what needs to be done, caregivers are usually treated as employees of the individual for whom they provide services.
If the caregiver employee is a family member, the employer may not be responsible for employment taxes. (Warning: Reread the first sentence of this paragraph! It does not say that employee is exempt from paying income taxes. Rather, it states in a much more limited way that the affected loved one is not responsible for their portion of employment taxes.) However, the employer still needs to report the caregiver’s compensation on a W-2.
If it is determined that caregivers are not employees, the caregiver is still required to report compensation as income on Form 1040.
Depending on the facts and circumstances, the non-employee caregiver may have to pay self-employment tax. Under a personal-care agreement, family caregivers do not owe self-employment tax on the payment for a family member unless they are in the business of providing care to others.
The determination of whether a family member caregiver is an employee is a fact-specific and complicated manner. If drafting a personal-care agreement in which the caregiver and the person receiving the care are related, Consult your trusted Estate Planning attorney who is familiar with the state’s laws on employment.
If you’re ready to start getting your estate in order and secure your assets for the “worst-case” scenario, please give our office a call at 800-310-3100. Your first consultation is absolutely free. We’ll let you know what steps you need to take, right now, to protect yourself and your family. Call now.
Rick L. Law, Attorney, Estate Planner for Retirees.
Rick has been named the #1 Illinois elder law estate planning attorney for the past 8 years in a row by Leading Lawyer Magazine. He has been quoted in the Wall Street Journal, AARP Magazine, TheStreet.com, and numerous newspapers and articles. Rick is the lead attorney for Law Elder Law, LLP, focusing in Estate Planning, Guardianship, and Nursing Home Solutions. His goal is to give retirees an informed edge when it comes to dealing with an uncertain future. Get flexible retirement strategies that work during good times and bad, plus information on how you can save your home and assets from being used to pay for long term care. Call 800-310-3100 for your free consultation now!
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