Are In-Home domestic Workers Independent Contractors?
IRS states In-Home Domestic Works are NOT independent contractors (1099).
Caregivers have the right to claim that they were given a 1099 incorrectly when they file their own taxes.
In these instances the IRS will then audit the family for the unpaid payroll taxes they may be delinquent on.
What are household employers responsible for?
The IRS requires all household employers to pay employer FICA taxes, while withholding their employee's portion of FICA taxes as well.
Employers may opt into pay their employee's portion of FICA, but 98% of employers do not.
If the employee's FICA taxes are not withheld, the family is required to pay it for the caregiver.
FICA = Social Security (6.2% of total wages) Medicare (1.45% of total wages).
They must also pay employer FUTA and SUTA = Federal and State unemployment taxes (2-3% of total wages)
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 the employer taxes a family should expect to pay based on the state they're in ('Fees' is the 20% service fee).
Who actually pays the IRS?
HWS gets the quarterly wages from CareLinx. They 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. HWS gives a 3-4 days notice.
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