Hiring a Caregiver 1099 vs. W2
According to the IRS, if a privately hired / independent caregiver is paid more than $2,100 per year (in 2019), they are considered to be a household employee, not an independent contractor. Therefore, the family hiring the independent caregiver takes on all the responsibilities of being an employer including payroll and taxes.
The reason for this designation is because when one hires a caregiver, the employer has control over what time they arrive, what they will be doing, what time they leave, and so forth. In contrast, if one were an independent contractor, they would have the freedom of choosing what days and hours they work.
Having a newly hired employee makes the family the employer, and as an employer, there are certain tasks one must complete. Lucky for you Kindly Care is here to help with all of them!
1. Get an EIN (Employer Identification Number). This is sometimes referred to as FEIN (Federal Employer Identification Number). This is a nine-digit identification number one obtains from the IRS. There is no fee required and it will be needed to file IRS and SSA (Social Security Administration) tax forms for one’s employee. Kindly Care does this for you!
2. Register with your state revenue department as an employer to get a state tax identification number. (Most states require that employers get two state tax identification numbers). These numbers are for state income taxes and state unemployment insurance. Kindly Care does this for you!
3. File a USCIS Form I-9. This is an Immigration Status / Employment Eligibility form to ensure one is eligible for employment in the U.S. (meaning they are a U.S. Citizen or a legal alien). This form must be completed prior to an employee’s first day of work and kept with one’s employee records. Kindly Care does this for you!
4. Complete a Form W-4. This is an Employee’s Withholding Allowance Certificate, which is used by the IRS to determine how much federal income tax is to be withheld from an employee’s paycheck. It must be filled out prior to the first pay period. Kindly Care does this for you!
5. Complete a State W-4. This form is for the state’s Department of Revenue and is filled out to determine how much state income tax is to be deducted from one’s payroll. Kindly Care does this for you!
6. As the employer of an independent caregiver, managing payroll can be a challenge. It includes calculating hours and pay, reporting payments to federal and state agencies, withholding and paying Social Security, Medicare, federal and state income tax, and Federal Unemployment Tax. For each tax and withholding, a complicated formula must be followed. Kindly Care does this for you!
For more information, click here to access the 2020 Household Employer's Tax Guide.
We're here to help you safely, legally hire a caregiver for your loved ones. Should you have any other questions, please don't hesitate to give us a call. One of our representatives would be happy to assist you.