Are you ready to let a stranger into your parent’s home? Before you say “no,” you should understand that there is a good chance you will have to do it at some point in your life. As Boomers (born between 1946 and 1964) continue to age, they will find themselves in need of help at home. Back in the day, family members would have stepped in to fill the gap, but today’s working age adults are staying in the workforce longer to pay for their kids’ education and accumulate funds for retirement. Enter in-home caregiving industry: $61B strong and growing.
Hiring an in-home caregiver is a difficult decision on three levels: emotional, legal, and financial. Here is a blueprint for thinking through your options.
Consider the emotional side
Hiring a person who will be assisting your parent in a time of need is a big decision. Begin by determining the skill needs and the personality match. Remember that both are equally important! Sometimes, people get caught up in the fact that they really enjoy a caregiver’s personality – so much that they overlook a lack of skills in an area that is critical for their parent’s care.
Next comes due diligence. You must vet the caregiver or the agency thoroughly. Background checks are a good place to start. Don’t be shy about asking for recommendations and making phone calls to check references. After all, you are hiring a “proxy family member”!
Lastly, remember the importance of open communication. Keep all the siblings in the loop, so that there are no surprises or accusations later.
Next, beware of legal complications.
Do you have to have a formal contract with your in-home caregiver? While there is no contract requirement in the state of Texas, it’s a good idea to have one anyway. A contract helps you set clear expectations and protect everyone. Be sure to include the job description, pay arrangements, and taxes. You may be able to find sample in-home caregiver agreements online, but keep in mind that those are meant to be used as a guideline – not a substitute for an attorney.
Be sure to check that the caregiver is legally allowed to work in the US. The standard is higher if the caregiver is an employee as opposed to an independent contractor (more on this in a moment). Regardless, you are well-advised to check the caregiver’s personal identification documents and employment eligibility.
Lastly, consider whether you will need insurance. The home health care industry reports high rates of injuries, and minimizing the risk to both the caregiver and your family is important. Workers compensation insurance, umbrella insurance policy, a bond, or some other kind of liability protection may be worth considering.
Finally, look at the money.
A key decision that will determine your expenses and reporting requirements is whether the in-home caregiver is an employee or an independent contractor. This distinction is not black-and-white: you will have look at the nature of your relationship with the caregiver, the degree of control you retain over what work gets done and how it is performed, and other circumstances. The details of this distinction are beyond the scope of this short article, but I recommend digging into the Department of Labor guidance (Administrator’s Interpretation No. 2015-1), as well as the IRS code (Sec. 3121(d)(2)), for more details.
If the in-home caregiver is determined to be your employee, you are responsible for withholding taxes, Social Security and Medicare. Your family must also match the Social Security and Medicare withholdings, pay federal and state unemployment taxes on the wages, and potentially withhold income taxes. Maintaining proper paperwork and staying on top of the withholdings is a considerable commitment!
If the caregiver is an independent contractor, he or she is responsible for his or her own taxes. If payments to the caregiver exceed $600 for the year, your family will have to prepare Form 1099-MISC to report the total amount paid.
The documentation requirements may seem daunting (especially for an employee), but remember that paying a caregiver “under the table” has a hidden cost. Not only is your family breaking the law and potentially subject to steep penalties, you also miss out on claiming the dependent care credit.
In-home caregivers: what you need to know
Hiring a personal care or health aide for your parent is a big decision. In addition to covering financial and legal basics in the beginning, be sure to set up appropriate controls and supervision. Most caregivers are diligent and honest, but there is a first time for everything. Stay on top of your parent’s finances, especially if he or she is in a vulnerable state.
Reference for rate of injuries in home care industry: http://www.bls.gov/opub/btn/archive/injuries-to-caregivers-working-in-patients-homes-pdf.pdf