The IRS estimates that it takes the average household employer 60 hours annually to comply with all federal and state tax laws. To add insult to injury the caregiver often does not realize they are the employee and or does not understand whether a net or a gross wage was agreed upon.
As a household employer you have myriad responsibilities:
Employment tax filings and remittance of federal taxes.
Employment tax filings and remittance of state taxes.
Compliance with federal, state and local labor employment laws, as well as obtaining worker’s compensation insurance.
The IRS defines a household employer as someone who pays an individual to perform duties in or around their home and controls when, where and how or by whom the work should be performed. In almost all instances, by definition, caregivers are considered employees of the household and not independent contractors. Classifying these workers as independent contractors has been found in many instances to be unlawful, resulting in tax assessments, penalties and interest against the household. In caregiver situations involving the elderly, the employment tax liability can even pass to the estate when the recipient passes away.
The responsibilities of a household employer can be overwhelming and many families do not realize that they are the employer of the caregiver or how to begin to understand all the responsibilities of being a household employer, let alone compliance with all the tax filings that are associated with being a household employer.