Can I pay a Home Health Aid with a check but not take out any taxes in NYS?

Monday through Friday, you can call the IRS to ask this question through this link:
http://www.irs.gov/Help-&-Resources. Perhaps you'll get a better answer here, or you could ask locally from your banker what their advice would be.

when your caregiver arrives, do you direct how your aunt is cared for or is caregiver merely told hours to work there? are you paying the agency or are you paying caregiver directly? if you are paying the agency, then you don't have to worry about anything. if you are paying caregiver directly, the first question above comes into play. if you tell caregiver what to do while she is with your aunt, then caregiver is an employee & you must deduct employee taxes. however, if you just tell caregiver when to show up, then caregiver is self-employed. if the caregiver is self-employed, then you will need to close out that federal id#. if not, irs is going to come looking for payroll tax forms that don't need to be filed & you're going to have one headache on your hands.

What I believe you are describing is paying someone "under the table" for home care. If you do this, know you cannot then bill Medicare for homecare because you do not have business or business license. The persons accepting money under the table are also breaking the law if they do not report their income when tax season comes. But, you can do what you want...

I may be taken to task for being too simple. Why would this be different than when one hires a babysitter?

I'm paid (flat pay )caregiver for private home. The end of year I will get 1099MIS from my client family. I do pay my tax every quarterly, so make sure before you're going to write to check to any caregivers's get that everyone's SS#. You will report to IRS for your Mom's care. It is not hard to create 1099 form...Under the table to me is anyone doesn't get benefit at all.

Sounds like an Independent Contractor situation to me. They sign a form stating that they are responsible for their own taxes and you give them a 1099 at the end of the year. If it is completely under the table, no reporting , you cannot claim that money, as far as I know.

This one can be a can of worms.

First, if you want to indicate pay down for an HHA, you will definitely want to write a check. It seems to me that you are wanting to do this legitimately as I never interpreted anything you wrote as suggesting that you pay these helpers under the table.

Next, l think you meant that you obtained an EIN which stands for employer identification number. As you read on, you may decide that you don't need it now but you may need it later and I wouldn't divest myself of it right now since you've already gone to the trouble of getting it. You will receive payroll forms to complete but if you have no employees, which I believe will be the case for awhile at least, you just indicate "zero" and send them back. Not a big deal.

And now the GOOD news: the IRS seems to realize but there are growing numbers of elderly or medical needs folks who need home assistance. Hence, there is a special category of worker called "companion sitter" (sunsetSheila's common sense was right on here although common sense doesn't always work). This job is basically a babysitter who can also do little chores around the house. The IRS allows this category of worker to be paid as an independent contractor, without taxes withheld, and given a 1099-MISC (stands for "miscellaneous" - STP is correct) for any one q..person who is paid $600 or more during the year.

I would suggest that you prepare an agreement between yourself and anyone you hire for this work specifically stating but they are a companion sitter, will be with (... name the person ...), watch TV with them, play games with them, bring them food when they're hungry, help them to and from the bathroom when necessary, keep the house tidy and do any light housekeeping as they would do in their own home as needed to keep the home safe for the person they are helping. I suggest you entitle it "Agreement for Companion Sitter" do it up on your computer with blank lines for both of you to fill in because you will both sign it. It will include YOUR name, address and phone number; name of person being assisted; HELPER's name, address and phone number, drivers license number, and social security number (make copies of these and attach them to the signed form for your records); the hourly rate of pay agreed upon, the pay interval (weekly, bi-weekly, semi-monthly, etc), and how many days after the pay period ends, you will make payment. Just specify correctly. You both sign, each get a copy. Make up another blank form with a space for the workers name and Social Security number, the date and the hours worked. Have the person submit it to you at the end of the pay period and pay them on time as per the agreement.

What CalcLater1 is referring to is the difference between an employee and a contractor. If the assisting person is not a companion sitter, you get into a different situation where you may need an EIN. This can get into several sticky wickets, gray areas it sometimes don't come out in the wash until you are audited, which I'm sure you'd LOVE to avoid.

There are sets of determinative questions depending on to whom you speak. I do accounting and tax prep and would be glad to bestow my pearls of wisdom for no charge when you need it at a later date. For now, I think you have everything you need. If you need clarification, please don't continue this thread, just post directly on my wall. Good luck.

With independent contractors there are some specific rules about how they perform the work and when they work and what supervision is aloud to tell them to do. I say this because I often employed IC's in another field and was quite shocked when I read these rule. Be sure to do your research in advance.

1tired ... paying someone as an independent contractor and giving them a 1099 which goes to the IRS is legal and above board and can be deducted as an expense. You'd just better be sure they ARE an independent contractor and not an employee, because of their found to be an employee after the fact during an audit, YOU will owe the taxes you should have deducted plus penalties and interest. Yikes!

Paying a worker "under the table" means paying someone cash that is never reported. THAT is it legal no matter which category the person would have been in have they been working and being paid legitimately.

It's indeed a can'o'worms! Those needing home care, often cannot afford to pay an agency. Agencies often charge DOUBLE what the worker gets paid, not counting deductions.
For families and elders, that is out of reach--not only due to cost, but also due to serious limits placed on how many hours of caregiving can be paid for by Medicare or other insurance. Agencies fail to assess clients adequately, resulting in too little caregiving hours being allotted.
ALSO, too often, home care workers may be former welfare recipients who have been pushed to work as home care workers---without adequate training, and without them having adequate decent health of their own to handle the work needing done. ALL those things contribute to families seeking home care workers who will work for cash under the table...hoping everybody wins...

The IRS says that working for cash only, under the table, is illegal.
They may be right, as long as people allow them to mandate taxes and other fees get deducted from wages, or that workers report every penny they get from all sources.
Even "trading" services and goods, are supposed to be taxed. [[as if that happens!]] A minor child who babysits, is supposed to report their income on their parent's taxes....make sure those get paid in the Quarter they got earned, or risk being fined.

Short answer:
If you are paying a caregiver help, cash, THEY are responsible to report their income to IRS, and, they must pay taxes on that in the Quarter it was received.

While not required to pay into Social Security for income earned, it is highly recommended--at least so far....IMHO, if those working hard to privatize Medicare and SSA, get their way, I would not willingly pay into it anymore--I'd sooner pay into my own fund, rather than some greedy Corporate arrangement. Privatization has caused a growing feeding frenzy of profiteering, over the last 100 years, that has fed our current economic disaster. The greater the gap between the wages of the lowest-paid and the highest paid, and longer the larger gap exists, the greater and longer our economic disaster is. This has been repeated and documented throughout history.
IMHO, I would be willing to pay someone under the table.
Likewise, I would be willing to receive pay under the table.
...I no longer believe our government has anyone's best interests at heart, only the corporations that pay to railroad our government.

People can choose for themselves.

Another area not mentioned is Medicaid. How are you going to explain weekly checks made out to a person that is not technically employed as a caregiver. If your aunt needs to apply for Medicaid the amount of those checks will apply toward a waiting period. Medicaid will consider those costs as a gift, because the caregiver is working under the table and not legally employed as a caregiver.

Carolyn, I know that Independent contractors with a 1099 are legal. What I was trying to get at is that HOW the workers work and WHEN the workers work is an issue if you want to be totally legit. For example, independent contractors have work assigned to them, but you really might not legally insist that they be there certain hours, just that the work is in fact done. Research MUST be done in this particular field to see if they qualify to be ICs. If a person must work certain hours or do things a particular way they MAY not qualify. Better to check it out before getting in trouble. The paperwork is very easy, understanding the rules that govern ICs not so much.

Poor "4AuntJoan" as I fear that these responses are going to confuse her.

Doesn't this site have a CPA ok and shine and back me up here? Until or if that happens, please let me address the following:

Chimonger - l see my "can if worms" expression attracted you, it is isn't it? I understand your philosophy but we can't solve the problems and procedures of the IRS, unfortunately. And you are so right, the lot is to report the value of "barter" as income. As far as minors babysitting, they are allowed to earn a certain amount of money even as a dependent before it accrues to the income of the parents.

Debralee & 1tired - it is unfortunate that the issue of "under the table" was ever brought up because that was neither asked nor implied in the question of the original poster. And it's served to cloud the issue.

In order for an expenditure to qualify for the medicaid pay down, the money must be spent for the person directly, that is their shelter, food, clothes, transportation, personal vehicle, mortgage, maintenance, repair, home care assistance, etc. Nothing can be or appear to be a gift. Even the attorney contributing to this site recently posted that travel expenses paid by the elder's funds to bring a family member to the elder to help care for the elder would not qualify for the pay down as it would be considered a gift.

So, since 4AuntJoan's question was about paydown in terms of a paid aide, it is critical that she never ever even considers paying the aid in cash because she needs the money to be processed through the bank to prove the payment. The proper paper trail is very important to the Medicaid process.

Now, as to whether this paid aide is an employee or an independent contractor, if you hire a private "companion sitter", the IRS Code allows that person to be an independent contractor. That means that 4AuntJoan should write a check from Joan's funds, do not deduct any taxes, right home health aide in the memo and issue a 1099-MISC for the total paid at the end of the year. I have already posted what I suggested for her to prepare as an agreement as well as an interval time sheet, so I won't go over that again.

There will be no question about paying the aide without deducting taxes as long as you have set up the paperwork that the aid is a "companion sitter", which she or he would be.

1tired - yes, the IRS is very fussy about the rules of employees vs independent contractors. The reason is because they want the majority of people, if not everyone, to be employees. They what the collected money in the Treasury. They don't want to have to wait for the monthly or quarterly estimated filings or have to trust that they will get them, because they don't always. So there are specific guidelines to follow in order to classify someone as an independent contractor.

For those of you who want to be their own Sherlock Holmes, which I highly recommend, you can google "IRS Statutory Non-Employee" and you will find under that category that there are three types of workers who might be considered employees if you followed the rules. However, by STATUTE (BY LAW), these three types of workers are considered non-employees and therefore bye STATUTE, may be treated as independent contractors for tax purposes. That means they can be legally paid with no federal or state taxes withheld, no social security or Medicare taxes withheld, no state disability withheld and no workers comp employee insurance paid (this is a separate legal matter but most home policies have a workers comp clause for people who do work in and around the home - but each state being different, this should be checked with and your own homeowners policy).

The 3 categories of workers that are specifically Statutory Non-Employees are workers who are (1) in Direct Sales, (2) Licensed Real Estate Agents, snd Companion-Sitters.

So, along with the appropriate agreement form and interval time sheets, 4AuntJoan may legally hire companion-sitters as aides for Aunt Joan, write a CHECK with no deductions to pay the person, and it WILL qualify as pay down for Medicaid. There will be reasonable cost care available for aunt Joan, it will be proper as far as the IRS is concerned, and it will count toward the Medicare pay down. Please do not forget to issue a 1099-MISC at the end of the year for each person who assisted aunt Joan. Technically it is only required to make the 1099 for persons who are paid $600 or more in a calendar year. If I were you however, I would prepare a 1099 for each person regardless, so there again you have that all important paper trail that matches.

The "only" time there is a problem with Employee vs Independent Contractor is if the employer and worker are not on the same page. If the worker pays withholding and self-employment taxes quarterly, the IRS will have no reason to complain. The problems I ran into were with workers who never understood that they needed to pay the taxes.

It is STILL NOT A PROBLEM for the payor as long as the agreement stating companion-sitter and the interval time sheet signed by the person are in order. The agreement can even specify that the person "must pay his or her own taxes on a schedule based between them and the IRS, so please see your CPA."

I agree that this problem between employees vs independent contractors is a sticky wicket under normal circumstances. But the companion-sitter, just like the direct sales person and a licensed real estate agent are specifically exempted from that confusion because of the clause in the code regarding Statutory Non-Employees. If the payee IS a companion-sitter AND the paperwork in place indicates that, the IRS cannot come after the payor regardless of whether the payee pays his or her taxes or not. The delineations between employees and independent contractor are very often nebulous. Folks who don't want to be treated as an employee try to make up their own rules. That's YBR s so diligent about it. but the Statutory Non-Employee is a special case where there's no confusion.

correction ... that last sentence should start "That's why the IRS is so diligent ...

Are the wages I pay the "companion/sitter" eligible for deducting on my income tax.