MarilyninMD suggested that I start a new thread for this issue.
Regarding bringing, or keeping, a LO home - How do you handle the IRS with regard to the hired help. I have hired a woman independently (not through an agency) who does this, and other, work for several people. She works for me an average of 7 hours a week. I think of her as an independent contractor. Since I keep track of what I pay her and deduct this from my income tax, how do I report this to the IRS? Do I have to take out anything for her taxes or pay any social security?
marsh--I use an Agency for hired help so I don't have to worry about the taxes and FICA. I think you should start a new thread with your question, I know we've discussed hired help a lot, but don't remember that particular issue. I think the independent contractor thing is a grey area; also, I was advised by an attorney who handles worker's comp cases exclusively that if I hire privately, at a minimum I should add a worker's comp rider to my homeowner's policy in case someone would file a claim saying they were injured on the job (I know that you and your wife are in a retirement community so that may not be necessary).
I asked my accountant this question was was told that, depending upon how it looked, I should file a 1099 at the end of the year or deduct federal taxes, social security, and workers comp. Since that includes everything except just deducting the cost of care on my taxes, she was really no help. I just met another resident who is a retired tax lawyer. He said I probably could just deduct the cost of care paid to Margo, and not worry about the other issues. Now I am totally confused (which is what the government wants)
Marsh, I received some homespun advice once from an old preacher that I've let guide me in similar situations, and I believe that's what your retired tax lawyer acquaintance was trying to suggest to you -- "Forgiveness is usually easier to get than permission...."
Marsh, the IRS has specific guidelines for what they consider a Self Contracting person, check up on those guidelines before you venture into the deduction. Also the IRS usually requires documentation that the service was needed as per a physician before it can be qualified as a medical deduction.
Marsh - you issue a 1099 to here and send a copy to the SS. You need to find out what your state requirements are to be an independent contractor. Many states require the independent contractor to have minimum 2 customers/clients, if not they do not qualify. Let her be aware you are filing a 1099 (of course she will get her copies) on her so she will also claim the income because the IRS will look for it. If she does not qualify for an independent contractor, then you will have to pay taxes on her like an employee (I am sure you dealt with all that while you were in practice).
Also, the IRS will not be as particular whether she qualifies as an independent - but the states are. They want their money for unemployment insurance, workers comp, etc. Also, if you paid someone less than $600 in one year, you do not have to report it and they do not need to claim the income.
Marsh, What if you hire a professional caregiver who states that they are an “independent” contractor, and that they do not want you withholding anything for taxes? Simply put, the IRS does not allow for this, and they have very strict guidelines which define the difference between an employee and an independent contractor. Since professional caregivers and domestics are considered to be employees by the IRS, it doesn’t matter how a professional caregiver may refer to themselves, or how you may have referred to them in an employment contract. Technically, they are working for some one – you, therefore they are an employee and can not be considered, especially by the IRS, as an independent contractor. No matter what your caregiver wants to call themselves, the bottom line is that you are still obligated for all payroll tax filings and remittances.
When it comes to worker’s compensation, it’s best for you to check with a local, licensed insurance broker who will be able to tell you what your local regulations stipulate. Since each state’s regulations concerning worker’s compensation and disability insurance vary greatly and can be quite confusing, it’s best to have a professional tell you what you need to be paying into as an employer. For employees, worker's compensation is a form of protection, mandated under state law for a worker and his or her dependents against injury and/or death occurring in the course of their present employment. Worker’s compensation insurance may be purchased through a licensed insurance broker and/or a state insurance fund. This is a policy of insurance and not a payroll tax. The purpose of a worker's compensation system is to provide financial and medical benefits to the victims of “work-related” injuries and their families regardless of fault. The cost of this insurance is paid by the employer. Insurance premiums are determined by the number of employees, their annual payroll, and the type of work they do. As an employer, do not confuse worker’s compensation as being some form of health insurance, nor is it intended to compensate for any disabilities acquired prior to accepting the position they presently hold.
Remember, if you do become an employer, you must pay all taxes that are expected of you. Failing to do so will compromise the validity of your own personal income tax return, and since there is no statute of limitations on failing to report and pay federal payroll taxes, you will eventually be expected to pay back taxes, with penalties and interest charges that will likely exceed the original amount owed.
The very fact that the caregiver does not pay the taxes they should pay as an independent contractor also falls on your back.
Don't be fooled, the IRS is very concerned and particular about this. If the worker decides to file for disability or workers compensation and you have not performed your part correctly then you can be penalized for hundreds or thousands of dollars. I had a friend who this happened to.