National Private Duty Association Warns of Tax Implications with Household Help

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The National Private Duty Association says that consumers who hire independent caregivers could be headed for tax problems if they don't understand their obligations.

With so many providers of home care available, it can be very confusing, especially if help is being sought during an emotional time

Someone doesn't have to be running for a federal government cabinet post to be impacted negatively by the tax implications of hiring household help, according to the National Private Duty Association.

Nearly 25 percent of U.S. adults are caregivers for an older family member or friend, and many of these families are becoming accidental employers when they turn to a friend, acquaintance or individual to provide help for mom or dad.

The Internal Revenue Service (IRS) has clearly defined the household help category according to Jill Senso, education coordinator with the National Association of Tax Professionals, a nonprofit professional association dedicated to excellence in taxation.

"Household help is anyone who does work in or around your home," Senso said. "Examples would be babysitters, caretakers, housekeepers, gardeners, health aides, private nurses, nannies, yard workers or drivers. The worker becomes your employee if you control what work is done and how it is done."

Senso said the definition applies regardless if the person works full time or part time, was hired through an agency or list provided by an agency, or if you pay hourly, weekly, monthly or based on job completion.

According to the IRS, if consumers pay wages of $1,600 or more during the calendar year, they must withhold and pay social security and Medicare taxes. If consumers pay wages of $1,000 or more in any calendar quarter, they must pay federal unemployment taxes.

As home care choices escalate, an increasing amount of care is being provided by nurse registries and employment agencies that act as "matchmaker" services, assigning independent contractors to clients and patients in need of care. Many consumers who use these types of companies never realize that there are potential legal and tax consequences that go along with the use of an independent contractor.

"With so many providers of home care available, it can be very confusing, especially if help is being sought during an emotional time," said Kim Stoneking, executive director of the National Private Duty Association (NPDA). "Consumers, more and more, are turning to companies that offer them the cheapest price for care without understanding the implications of their choice. In many situations such as these, an employer/employee relationship is created between the consumer and the independent caregiver, and the consumer is unaware."

The National Private Duty Association is the nation's first association for providers of private duty home care, which includes non-medical home care services. NPDA members set themselves apart from other home care providers because of the supervision and training they provide, which assures a consumer is getting the best care possible.

"Private duty home care agencies are companies that provide home care aides, companion care, homemaker services and skilled nursing services in the patient's home," Stoneking said. "Additionally, members of the NPDA employ trained caregivers and assume all responsibility for the payroll and all related taxes - this is never passed off to the customer."

If a person must hire someone for assistance in their home, Senso urges consumers to consult IRS Publication 926 Household Employers Tax Guide, available on the IRS website at http://www.irs.gov/pub/irs-pdf/p926.pdf.

"I strongly urge people who find themselves in a position of needing household help to speak with a tax expert/accountant prior to doing so," Senso said. "The process is complicated and you would save yourself immensely by having a professional on board from the beginning. In many cases, when people have tried to handle payroll taxes on their own, mistakes are made. It proves to be more costly to amend after the fact, than to have them done correctly once the person has been hired."

Household Help Know-How

There are many unexpected or hidden issues when consumers hire independent caregivers. The National Private Duty Association offers these considerations when looking for a home care provider:

Payroll taxes: The simplest and most direct requirement is that anyone who gets a paycheck must pay the government any taxes due. This includes social security, Medicare, federal and state unemployment and state and federal payroll taxes. When the consumer is the employer and none of these taxes is being paid, there can be serious financial implications.

Work-related injuries: If no worker's compensation protection is provided (as mandated by law for employees in nearly every state), and the worker sustains an on-the-job accident, the liabilities can be substantial. Medical costs and disability payments could result in financial hardship for even a very wealthy consumer. Many believe their homeowner's insurance will cover such accidents; however, most policies exclude household help.

Caregiver supervision: Because of IRS regulations, registries and independent contractor agencies cannot provide any work supervision, scheduling or training to workers without becoming employers. For consumers and their families, hiring an NPDA member home care agency provides assurance that someone with experience and responsibility is reviewing the changing care needs of their loved one.

The NPDA currently represents more than 1,200 member organizations throughout the United States that provide private pay in-home care services for the elderly and disabled. For more information about the NPDA and to access their member directory visit the association's web site at http://www.privatedutyhomecare.org.

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