A recent article in the March 19, 2009 edition of the Wall Street Journal described the tax consequences for a client or family when they hire an independent caregiver or work through a registry. Quoting several sources, including Kim Stoneking, Executive Director of the National Private Duty Association, the article points out the requirements for clients to withhold and pay taxes.
For example, it says, “If you pay a household caregiver who is your employee more than $1,700 in 2009, the tax code requires you to withhold and pay Social Security and Medicare taxes.
If you pay the caregiver wages of more than $1,000 in any quarter, federal unemployment taxes must also be paid. State and unemployment taxes must be withheld and paid as well. If the taxes are unpaid, the taxpayer must pay what’s owed, and will face late filing penalties of between 5% and 25% of the underpayment plus interest.”
Private Duty Home Care companies who operate as the employer of their caregivers will want to clip a copy of this article and make it available to their clients and potential clients to help understand the value of working through an agency rather than hiring directly.
The employer model versus the registry model has been a long standing controversy in home care. What is your take on this issue? What do you tell your clients when describing your model of doing business? Give us your comments below: