Is a caregiver a 1099 independent contractor?
IRS states In-Home Domestic Works DO NOT meet the requirements to be independent contractors (1099).
Caregivers are either the employee of an agency or the family that has hired them.
When hiring through CareLinx, the family is the employer.
What are household employers responsible for?
Do I need to pay employment taxes?
If you have a household employee, you may need to withhold and pay social security and Medicare taxes, pay federal unemployment tax, or both.
What taxes are being withheld from the caregiver on CareLinx?
Social Security and Medicare taxes.
No state or federal income taxes are withheld.
Some states have additional required withholdings of disability insurance and paid family leave. These are withheld as well.
***Taxes are ONLY withheld if signed up with Homework Solutions (HWS). This service is FREE as part of their CareLinx Service ($800 Annual Value).***
Who pays the federal and state income taxes?
The caregiver is responsible for all federal and state income taxes. They must plan ahead for these taxes. Will be owed on their personal taxes at the end for the year.
Do I need to withhold federal income tax?
You’re NOT required to withhold federal income tax from wages you pay a household employee.
You should withhold federal income tax only if your household employee asks you to withhold it and you agree. The employee must give you a completed Form W-4.
If you and your employee have agreed to withholding, either of you may end the agreement by letting the other know in writing.
If you agree to withhold federal income tax, you’re responsible for paying it to the IRS.
What are the consequences of NOT paying employment taxes?
If you have a household employee and you're required to withhold and pay employment taxes and you don't, you will generally be liable for the employment taxes that you should've withheld and paid. See section 2 in Pub. 15 for additional information.
Interest and penalties may also be charged.
You may have to pay a penalty if you don't give Forms W-2 to your employees or file Copy A of the forms with the SSA by the due dates.
You may also have to pay a penalty if you don't show your employee's social security number (SSN) on Form W-2 or don't provide correct information on the form.
What are the state and federal IRS tax thresholds?
There are two (2) tax thresholds that may cause a tax liability for a domestic employer:
State and Federal Unemployment Taxes
Must pay more than $1000 in GROSS wages in a single calendar quarter before these taxes are owed.
Some states have lower thresholds. CA is $750
Social Security and Medicare Taxes (FICA)
Must pay more than $2300* in GROSS wages in a calendar year for these taxes to apply. (*Subject to change each year)(Retroactive to 1st dollar earned)
If any FICA taxes have been withheld from the caregiver then the employer must remit ALL taxes to the IRS regardless of whether or not threshold is met.
Some states have SDI(State Disability Insurance) that must be withheld along with the FICA taxes
What are Caregivers responsible for?
Pay employee FICA taxes, and unemployment taxes that will vary from state to state (these taxes are withheld from their paycheck if the employer is enrolled in HWS).
File a W-2 at the end of the year (this will be provided for a caregiver if their employer is enrolled in HWS).
Pay State and Federal employment taxes, such as income tax and disability insurance (these taxes are not withheld from their paycheck).
Is a W-2 required, If the household employee made less than $2,000?
W-2s are not required to be filed if wages for a household employee are below $2k.
In fact, the SSA even states that they will reject W-2s that don't meet the filing threshold.
However IRS publication 926 explicitly states (page 11), "If you're not required to file a Form W-2, we encourage you to provide your household employee with a receipt for services that includes the dates worked, wages paid, and a general description of work completed."
This receipt will help them report wages on Form 1040.
CareLinx can provide employers/employees who are not enrolled in HWS's services with some statement of earnings that the employee can use when completing their 1040.
If enrolled with HWS, HWS will provide them a W2 that serves as this notice
What does the tax portion on the caregiver profile include?
(Example of a Caregiver's hourly rate, found under 'Caregiving Services')
The 'Taxes' portion of this calculation includes
Social Security and Medicare taxes.
Some states have additional required withholdings of disability insurance and paid family leave.
Who actually pays the IRS?
Homework Solutions HWS
HWS gets the quarterly wages from CareLinx.
HWS will calculate the taxes for each family and send a “Cash Required Doc” letting the family know the breakdown of taxes owed and schedule for draft.
Taxes withheld from the caregiver on CareLinx payroll is estimated as rules and rates change. You may get a refund or a bill depending on the changes in law and how much was withheld. CareLinx revisits the tax estimates each quarter to prevent large discrepancies.
HWS gives a 3-4 days notice.
***Taxes are ONLY withheld and remitted to the IRS if signed up with Homework Solutions (HWS). This service is FREE as part of their CareLinx Service ($800 Annual Value).***
Who is HomeWork Solutions (HWS)?
Why should I use Homework Solutions?
The IRS estimates that most families spend 55 hours per year trying to do household payroll and taxes on their own
This service is FREE as part of the CareLinx service ($800 Annual Value)
Peace of mind. All tax work is guaranteed.
HWS is licensed, bonded and insured
ANY family that will have a long term/ongoing caregiver will more than likely need HWS service
Why would I not use Homework Solutions?
If you already have your own CPA/Accountant who is already processing payroll taxes for you for other domestic employees
In this instance you must choose HWS or your CPA Accountant to process payroll taxes. This is because State Unemployment taxes cannot be paid by two separate entities
You will have a caregiver working for a short amount of time and will pay them less than, $2300 per year (2021) and less than $1000 in a single calendar quarter.
How do I enroll in Homework Solutions?
Should I get workers' comp insurance?
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