IRS Wants You to Pay Payroll Tax on Caregivers; Good Days Senior Care Has Solution for Seniors and Their Families
An elderly person hiring an in-home caregiver -- or a family member doing it for them -- may not believe they are a full-blown employer. But the IRS does. To steer clear of trouble with the IRS, use a senior care firm that will handle all the legal requirements of being an employer.
Irvine, CA (PRWEB) May 25, 2005 -- The IRS is on the lookout for seniors who
pay caregivers but fail to pay federal employment taxes. What the senior does
not know, or does not want to know, is that caregivers hired to work in the home
-- often called companions or aides -- are employees and not independent
contractors.
With the deficit in the federal budget enduring into 2006,
the IRS has been given the green light to increase audits on
individuals.
“Caregivers that render in-home care to seniors are
employees because they are not engaged in their own independently established
business,” says James R. Urquhart III, a California tax attorney and the founder
of Good Days Senior Care in Irvine, California.
When a worker is an
employee, the IRS wants the employer to withhold and pay the federal employment
taxes. “There is no exemption for caregivers that work in the home of the
senior,” Mr. Urquhart says.
There are many requirements to legally hire
and pay a caregiver. A federal employer identification number is needed because
an individual social security number is not enough. A Schedule H (Household
Employment Taxes) must be attached to the senior’s federal income tax return
(Form 1040). Moreover, at the end of the year the caregiver must be provided
with a Form W-2 (Wage and Tax Statement). Then a Form W-3 (Transmittal of Wage
and Tax Statements) must be filed with the government.
That’s not all.
There are more requirements to employ a caregiver. State tax laws must be met
such as state unemployment tax contributions and workers’ compensation insurance
coverage. Then you need to use Form I-9 to verify that the caregiver can legally
work in the United States.
“Most people want nothing to do with all these
rules. They just ignore them. That’s a big mistake,” Mr. Urquhart warns. “The
IRS often audits up to three years’ worth of payments. On top of back taxes,
interest and penalties will be added.”
“If you pay cash wages of $1,400
or more to any household employee then you must withhold and pay social security
and Medicare taxes. Those taxes are 15.3% of cash wages. The employee’s share is
7.65%. The employer’s share is a matching 7.65%,” states IRS Publication 926
entitled Household Employer’s Tax Guide.
Withholding federal income tax
from the caregiver is not necessary. “You do not need to withhold federal income
tax from your household employee’s wages. But if your employee asks you to
withhold it, you can,” the Tax Guide says.
The senior or the responsible
family member must use Schedule H to report household employment taxes if cash
wages of $1,400 or more are paid. “Most seniors and their families feel they
won’t get caught,” Mr. Urquhart says. “That’s a fantasy. All it takes to get
caught is for the caregiver to go down to the state unemployment office and file
a claim for unemployment benefits after he or she is laid off. States share
audit leads with the IRS.”
“There are things a senior can do to avoid
stepping on a legal landmine,” Mr. Urquhart instructs. Resist the temptation to
hire the caregiver yourself unless you want to be an employer that is
responsible for state and federal payroll tax laws, workers’ compensation laws,
and wage and hour laws. Use an in-home senior care firm. That firm should hire
the caregiver, treat him or her as an employee, pay all relevant taxes, and file
all relevant returns. In short, the senior care firm is the employer, not
you.
You need to find out whether the senior care firm is using
employees. “Be careful -- some senior care firms treat their caregivers as
independent contractors and not as employees. That puts you at risk,” Mr.
Urquhart cautions. “In my view, a senior care firm using independent contractors
is playing hide-the-ball. They hide the fact that they have no workers’
compensation coverage and likely do not have liability insurance
either.”
Good Days Senior Care treats its caregivers as employees. “In
addition to founding Good Days, as a tax attorney for over 25 years I have
represented many firms that treated their caregivers as independent contractors.
They came to me after getting audited by the IRS or the state. Once we get into
the heat of the audit or the appeal, they start to realize what a big mistake
they made.”
The senior care firm must do more than treat the caregiver as
an employee. “They should do a criminal background and motor vehicle department
check, have liability insurance, and bond the caregiver,” Mr. Urquhart says.
“All of these steps are needed to protect the senior client.”
For
additional information on the news that is the subject of this release, contact
Elisa M. Perez or visit www.GoodDaysSeniorCare.com.
About Good Days Senior
Care:
Good Days Senior Care is in the non-medical senior care industry.
Founded in 2004, it is headquartered in Irvine, California. The mission of Good
Days is to enhance the quality of life for those senior citizens who wish to
remain in their homes.
Once the franchise registration process is
complete, Good Days will offer franchise territories in states where registered.
With the exception of the home office territory in Orange County, California,
each Good Days franchise location will be independently owned and operated. The
Good Days brand and Good Days technical systems will allow Good Days franchise
owners to quickly establish their senior care business in their
market.
Both Good Days and Good Days Senior Care are trademarks of Good
Days Senior Care, Inc., incorporated in the State of California. Federal
trademark registration is pending.
Contact:
Elisa M. Perez,
director of public relations
Good Days Senior Care, Inc.
Irvine Spectrum
Center
7545 Irvine Center Drive, Suite 200
Irvine, CA 92618
USA
+1
(949) 552-1900
http://www.GoodDaysSeniorCare.com
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Source : http://www.prweb.com/releases/2005/5/prweb244072.htm