From what I understand because so many people now need caregivers for the rapidly growing number of elders who need care and people can't always offer to pay for Social Security and Medicare for their employees, the IRS has relented and created a special category for "statutory non-employees" called companion sitter. These non-employees work on an hourly basis and get a 1099 at the end of the year. Has anyone had experience doing this type of hiring?
It's deregulating people to gig work, like uber drivers. Well except these gig workers tend to be in their late 50s or beyond.
Most elders won't feel a bit bad that their caregivers won't get their NICE Medicare and SS.
They should.
As Geaton777 pointed out they should get 1099s from their clients, so the IRS would know about the income.
Elders who don’t have to pay the employment tax themselves might be more likely to file the 1099s, especially if they get any deductions for care or if they want proof of non gifting for an eventual Medicaid application.
For statutory non-employees to be exempt from all withholding taxes their services must be performed under a written contract that states they will not be treated as a regular employee..."
Source: https://www.bosstaff.com/2018/10/31/the-difference-between-statutory-and-statutory-non-employees/
I think each state will have their own rules on this as it pertains to caregivers, but not positive. This seems to only apply to the most basic type of caregiver, one who is not dispensing meds or performing any other medical assistance. It's for workers who are individuals and not operating under any type of business structure, like LLC or corporation, etc. At the end of every year the statutory non-employee will need to receive a 1099 that accurately reflects all wages paid to them. Then that worker is responsible to report that income on their tax return.
In MN where I live the employment law pertaining to caregiver states that they are never considered contract. I will need to review it to see if this has changed in my state.
The 2020 edition of the NOLO Press book "Working with Independent Contractors" spells out some of the requirements.
"Companion sitters are people who serve as companions for the sick and elderly. Typically, a companion sitter will find employment through a specialized placement service, rather than being hired directly.
A special employment tax law provision provides that sitters are not employees of the placement service if the service does not pay them wages—that is, if the companion sitter is paid directly by the person or business he or she is sitting for.
The relationship of the companion sitter to the client is a little more complicated. To sort it out, use the IRS common law test. Under this test, a sitter would be a client’s employee if the client has the right to control how the sitter performs the companion sitting services. It seems likely the right of control would be present in most companion sitting situations, except, perhaps, where the client is so ill or elderly that he or she doesn’t have the physical capacity to exercise any control over the sitter.
Companion sitters who perform their services at the client’s home are considered household workers for federal payroll tax purposes."
The 2021 IRS Publication 926 also makes connections to how the work is directed and where it takes place.
"Do You Have a Household Employee?
You have a household employee if you hired someone to do household work and that worker is your employee. The worker is your employee if you can control not only what work is done, but how it is done. If the worker is your employee, it doesn't matter whether the work is full time or part time or that you hired the worker through an agency or from a list provided by an agency or association. It also doesn't matter whether you pay the worker on an hourly, daily, or weekly basis, or by the job.
Example. You pay Betty Shore to babysit your child and do light housework 4 days a week in your home. Betty follows your specific instructions about household and childcare duties. You provide the household equipment and supplies that Betty needs to do her work. Betty is your household employee.
Household work. Household work is work done in or around your home. Some examples of workers who do household work are:
• Babysitters, • Butlers,
• Caretakers, • Cooks,
• Domestic workers,
• Drivers,
• Health aides,
• Housecleaning workers, • Housekeepers,
• Maids,
• Nannies,
• Private nurses, and • Yard workers.
Household work doesn't include services performed by these workers unless the services are performed in or around your private home. A separate and distinct dwell- ing unit maintained by you in an apartment house, hotel, or other similar establishment is considered a private home. Services not of a household nature, such as services performed as a private secretary, tutor, or librarian, even though performed in your home, aren't considered household work."
iamexhausted mentioned the 1099s in the original post.
In my opinion a "Companion" is a glorified babysitter. They do no physical caring, like bathing and toileting. They may get a meal, do some light housekeeping, take the person to appts or shopoing but they don't do anything a CNA would do.