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Have you hired a senior care employee to work in your home? Follow this senior care payroll and tax guide to ensure you are compliant with employment laws.
Step 1 – Determine if you have an employee or independent contractor
The main difference between an employee and a contractor is that an employee operates under the control and supervision of his/her employer (you), and a contractor retains all control over themselves and their services.
Step 2 – Research Tax Laws
The IRS states that anyone paying an individual $1,900 or more in gross wages during the calendar year, legally employs a household employee and must comply with all state and federal tax laws pertaining to household employer status.
Step 3 – Follow Payroll Regulations
According to the Federal Labor Standards Act (FLSA), all senior care employees must be paid at least minimum wage, however, benefits such as room and board can account for a portion of that wage. There is no limit to the number of hours an employee can work – provided there is a mutual agreement. Overtime may be required in your state. Paid vacations, holidays, and sick days are not required by law.
Step 4 – Submit Federal and State Forms
- Complete SS4 Form for an Employer ID # (download from GTM )
- Register for State Unemployment ID # (contact state for form)
- Register for State Withholding Tax ID # (contact state for form)
- Complete your State New Hire Report (contact state for form)
- Have employee complete W-4 Form (download from GTM and keep on file)
- Have employee complete I-9 Form (download from GTM and keep on file)
Step 5 – Add Workers’ Compensation to Your Insurance Policy
Most states require household employers to carry a workers’ compensation and/or disability policy if you employ someone on a full or part-time basis. These policies will protect you from lawsuits and liability in the event that your employee is injured on the job.
Step 6 – Set Up Dependent Care Assistance
You can pay your senior care employee with pre-taxed funds through an employer-sponsored Dependent Care Assistance Program (DCAP) if your employer offers this plan. A plan of this type would allow you to set aside up to $5,000 per year “tax-free” money that you can use to pay for senior care. Contact your employer’s Human Resources department for more details.
Step 7 – Calculate Withholding Taxes
GTM offers a free wage calculator on our website.
Step 8 – Distribute Paychecks Regularly
You have the option of paying your employee weekly, biweekly, semi-monthly, monthly, or at any other agreed-upon interval. Wages should always be paid via check so both parties have a record, and the amount should always be net (after all applicable taxes are withheld). You can also offer the option for direct deposit (check with your bank for details).
For more information, and to learn how GTM can help save you time and money by handling payroll and taxes for your senior care employee, contact GTM’s Household Employment Experts at (888) 432-7972.
