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?
- Household employers are required by IRS to withhold employee and pay employer FICA taxes.
Tip 💡: FICA = Social Security + Medicare
- FICA is usually split between employer and employee. Families can opt in to pay their CG’s portion of FICA, but 98% do not.
- If FICA is not withheld, the family is required to pay it for the caregiver.
- Federal Unemployment & State Unemployment Insurance (FUTA and SUTA).*
What are Caregivers responsible for?
- Pay FICA taxes and unemployment taxes (in some states). **These taxes ARE withheld from their paycheck**
- File a W-2 at the end of the year (HWS will provide if the family is enrolled).
- Pay state and federal employment taxes (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 the household employee to report his or her wages on Form 1040."
- Carelinx should 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?
- It includes an “estimate” of what the family would pay to cover their portion of the employment taxes in their state. Includes FICA and SUTA (state unemployment)
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 notice.
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