Caregiver Income Reporting

[Gail in Virginia]

I know that this board includes some EA's, but I don't know how many of you receive the EAJournal.  The September-October 2015 issue has an article entitled "Caregiver Calamities" that discusses caregiver income reporting and the liabilities that arise for domestic employees and/or caregivers.  In this article, Ben A. Tallman, EA, USTCP, asks the question about whether caregivers should be paid as employees or independent contractors.  In most instances, unless they work for a service that handles their employment, Mr. Tallman seems to think they should be treated as domestic employees and taxes withheld accordingly. 

However, Publication 15A specifically discusses "companion sitters" and states "Companion sitters who are not employees of a companion sitting placement service are generally treated as self-employed for all federal tax purposes."  Reg 31.3506-1 seems to be the section under which companion sitters are statutorily removed from consideration as employees.

These two positions seem contradictory.  I have had clients treat the caregivers they hire for their parents both ways, although 1099MISC is far more common in this area.  But I wondered if any of you have any thoughts about this issue, or have done any research that would support either position.  And do IRS regulations and DOL regulations by any chance contradict each other in this area? 

Why can't I ever determine something once and for all and forget about it?

Edited September 21, 2015 by Gail in Virginia

[Jack from Ohio]

I do not think "companion sitter" and "caregiver" are the same thing.  Two different positions, two different tax treatments.

[Lion EA]

Is the author referring to companion sitters as he would babysitters?  Casual, sporatic, so special skills, no "care"?

In CT, the DOL looks for W-2s for caregivers.  But, lots of people issue 1099s or nothing at all.  A few services handle the paperwork, but more and more of them give the client a sheet describing their reporting responsibilities.  Someone not in a trade or business does not have to issue 1099s.  I'm sure that's why more states are auditing the employee vs. IC issue and reclassifying workers as employees.  

[easytax]

Interesting enough a basically NEW decision or definition from the U.S. Department of Labor will eventually be effecting the IRS looking at employee vs. independent contractor which will also effect home workers, etc.. Given that many state Dept. of Labor are sharing when/if they find misclassifications with the IRS, the IRS may (lack of funds may hamper this) go after various entities (including the single tax payer, etc.) who does not send in their "fair share" of employment taxes.

Just food for thought --- here is the PDF --:

Independent Contractor vs Employee DOL_IC_Guidance 071515.pdf

NOTE: In PA there was Act 72 of 2011 about this and the state L&I dept. has starting being aggressive about IC or employee. Although when enacted meant to be just for construction industry, this is starting to "bloom" into many other areas.    Given most states are looking for all the money they can get --- it will grow (IMHO).

 

Edited September 21, 2015 by easytax

[Gail in Virginia]

From Reg 31.3506, the definition of "sitters" is " For purposes of this section, the term “sitters” means individuals who furnish personal attendance, companionship, or household care services to children or to individuals who are elderly or disabled."  and according to this section of the IRC of 1954, "c) Individuals deemed self-employed. Any individual who, by reason of this section, is deemed not to be the employee of a companion sitting placement service shall be deemed to be self-employed for purposes of the tax on self-employment income (see sections 1401–1403 and the regulations thereunder in part 1 of this chapter (Income Tax Regulations))."

 

[jklcpa]

I know that this board includes some EA's, but I don't know how many of you receive the EAJournal.  The September-October 2015 issue has an article entitled "Caregiver Calamities" that discusses caregiver income reporting and the liabilities that arise for domestic employees and/or caregivers.  In this article, Ben A. Tallman, EA, USTCP, asks the question about whether caregivers should be paid as employees or independent contractors.  In most instances, unless they work for a service that handles their employment, Mr. Tallman seems to think they should be treated as domestic employees and taxes withheld accordingly. 

However, Publication 15A specifically discusses "companion sitters" and states "Companion sitters who are not employees of a companion sitting placement service are generally treated as self-employed for all federal tax purposes."  Reg 31.3506-1 seems to be the section under which companion sitters are statutorily removed from consideration as employees.

These two positions seem contradictory.  I have had clients treat the caregivers they hire for their parents both ways, although 1099MISC is far more common in this area.  But I wondered if any of you have any thoughts about this issue, or have done any research that would support either position.  And do IRS regulations and DOL regulations by any chance contradict each other in this area? 

Why can't I ever determine something once and for all and forget about it?

 

I do not think "companion sitter" and "caregiver" are the same thing.  Two different positions, two different tax treatments.

 

Gail, I like your post above with the definition of a companion sitter and the cite, however I agree with Jack that "caregiver" and "sitter" denote two distinct categories as to the level of services provided. While both may work with the elderly and disabled, to be a sitter requires no specific training is more of a companion, much like babysitting. The caregiver may provide all of the same services as a companion but is also able to provide assistance with the activities of daily living and may also provide limited medical care. Here's a good page that discusses the distinction.

I only went so far as to visit the IRS site and perform a search for "caregiver", and this IRS page  was the first on the list. It has a discussion of caregiver reporting and refers the readers to pub 926, and there appears to not be a statute that requires caregivers to be reported only in one way. I didn't research further, but this page sounds like most of the others when weighing the issues of independent contractor vs employee.

[Gail in Virginia]

So, Judy, you and Jack are saying that "companion sitters" are different than "caregivers" and that the less professionally trained "sitter" would get a 1099 because they are statutorily deemed self-employed  and the position involving more responsibility and training, caregiver, would have less independence and control and get a W2? 

[jklcpa]

According to your article and cite, companion sitter would be reported as an independent contractor. I think it is interesting that this one job has been statutorily defined because the job of sitter also has duties that overlap into other areas that a hired housekeeper might perform. 

Based on the limited pages I looked at, it seems that the caregiver's status could go either way and that the determination is made using the facts and circumstances and rules we normally use for deciding if someone is an independent contractor.

ETA - yes, they are different jobs. Caregiving definitely requires more training and skills.  The medical community also has a specific view of what "caregiver" means, and it does involve someone that assists with the ADL, and some people hire caregivers so that they can remain in their homes longer instead of having to move into assisted living or a full-care nursing home.

Edited September 22, 2015 by jklcpa

[kcjenkins]

Why can't I ever determine something once and for all and forget about it?

Because the geniuses in DC are always changing and/or adding to the code.