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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