Author Topic: Tax Implications of Home Care  (Read 2492 times)

Frugal In Virginia

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Tax Implications of Home Care
« on: June 22, 2014, 03:23:10 PM »
My elderly mother-in-law has dementia. Father-in-law is in his 90ies; doesn't want to put her in a nursing home. They rely primarily on social security, small pension, and modest savings, and live in a relatively low cost area out in the country. They've hired someone (not through an agency) to come in five days a week (6 - 8 hours a day) to help provide her care and to do house hold chores. She is paid by check which I'm guessing she doesn't report to the IRS.

My first question is what are our legal responsibilities for how this should be reported and then secondarily what makes the most sense from a tax/financial standpoint for my in-laws?

Thanks in advance.

Mr. Frugalwoods

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Re: Tax Implications of Home Care
« Reply #1 on: June 22, 2014, 03:31:01 PM »
From what I understand, you are responsible for paying all employee taxes for a home health aide.  This includes payroll taxes, social security taxes, unemployment taxes... the works!  Google around for the "nanny tax" to get the particulars.

This is a major reason to go through an agency.  If you are paying the agency and not the aide, then you aren't the aide's employer and you probably don't have to worry about the taxes angle.

I'm just some guy on the internet, not a tax attorney, so make sure to get some professional advice.

Daleth

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Re: Tax Implications of Home Care
« Reply #2 on: June 22, 2014, 03:53:17 PM »
More reasons to go through an agency: they have liability insurance to help you in case your home helper causes harm (drops your MIL, steals something...), they have insurance to cover the helper in case she gets hurt on the job (so she won't sue your MIL/FIL), and they have multiple employees so if the one who usually comes is sick they normally should be able to send someone else.

But that all comes with a price. This may be what your MIL and FIL can afford.

Have you looked into Medicare coverage for her home health aide?
http://www.medicareinteractive.org/page2.php?topic=counselor&page=script&script_id=69

http://www.nytimes.com/2014/05/29/your-money/navigating-medicare-policy-on-physical-therapy-and-other-services.html