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The Caregiver as Employer 

When hiring a professional in-home caregiver, there are a couple of ways in which they can be selected, either from an agency which specializes in screening and placing professional caregivers, or by doing the research, interviewing, screening, and hiring all on your own. Keep in mind that if you hire a professional caregiver on your own, you will be entirely responsible for paying certain types of taxes that may be new to you, as well as having to know which taxes your new employee should be paying as well. Although you’ve hired a professional caregiver, who is much more than just a “domestic housekeeper”, the IRS will recognize you as the employer of a domestic.
 
If you pay your professional caregiver more than $1400 in cash wages per calendar year (note: the IRS may change this amount annually), you will be expected to file payroll taxes on such things as: Social Security & Medicare taxes (7.65% of gross wages); Federal Unemployment Tax (FUTA) (0.8% of gross wages or less in most circumstances); state unemployment and disability insurance taxes levied on the employer; and advance payment of the earned income credit for eligible employees. In order to pay an employee’s payroll taxes, you, the employer, will be required to collect the employee’s social security and Medicare taxes. If you fail to do so, you may be solely responsible for sending in your employee’s taxes on their behalf. Do know that deducting federal income taxes and most state income taxes is optional. If income taxes are not withheld by the employer, then the employee is required to make periodic payments of any amounts due. Just as you must pay taxes as an employer, you should know the type of taxes your employee will need to pay for themselves and/or contribute towards: Social Security & Medicare Taxes (7.65% of gross wages collected and remitted by employer); Employee Disability/Unemployment Taxes where required; Federal/State Income Tax.

As an employer of a professional caregiver (domestic), you must make annual payments for Social Security, Medicare and Withheld Income Tax (if applicable). Remember that wage reporting must occur on a quarterly basis, and state unemployment taxes and withheld state income taxes must be paid on a quarterly basis. Federal Unemployment is due annually, and, as an employer, you are required by law to give your employee a wage and tax statement (Form W-2) no later than January 31.

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