Taxes and Insurance When Hiring an In-Home Caregiver: What You Need to Know

So often people avoid something new because there are so many unknowns, so much uncertainty and fear that they will do something, or not do something, that will make a mess of some sort. In my business, I see this come up so clearly and frequently when people are thinking about whether or not to hire an in-home caregiver.

I hear things like:

• How much will I need to pay in taxes?

• How do I even know what taxes to pay, and what forms to fill out?

• Do I have to take taxes out of their check every week?

• Do I need insurance?

• What type of insurance do I need?

• Are there other forms that need filling out?

• Isn’t it simpler, just having an agency take care of all that?

Let’s take a look at these questions. Once you understand more clearly what you need to know and do, I suspect hiring someone privately will seem like a much more viable option.

(Photo by Kelly Sikkema on Unsplash)

Payroll Taxes

In New York, caregivers are considered household employees and not independent contractors. As such, you need to pay them as employees and deduct payroll taxes.

A number of companies offer Payroll Services which make payroll incredibly simple. These services handle all of the payroll requirements of a household employee. They take care of calculating the taxes, paying your employee via a direct deposit each week, filing your quarterly returns, and making the necessary tax payments on your behalf. At the end of the year, they provide you with a completed Household Employee tax return (Schedule H) for you to submit with your taxes and they send your caregiver the required W-2.

Payroll taxes vary by state, but in New York, assuming a typical rate of pay, your payroll taxes will probably be about 8-9% of your caregiver’s gross salary. Your Payroll Service can walk you through the exact numbers.

People often are afraid of all the paperwork involved in payroll and instead of opting to choose the caregiver that works for them, they decide to use a caregiver who works for an agency — just so they don’t have to worry about payroll. I have worked closely with a couple of different payroll companies and find that one, HomePay, makes the process very simple and efficient; they’re easy to reach and always able to answer any payroll related questions.

Insurance

Another great feature of a Payroll Service is they will get you set up for the required Worker’s Compensation & Disability insurance (“Workers Comp”).

Workers Comp covers medical bills and lost wages if your employee is injured on-the-job and is provided (in New York) by the NY State Insurance Fund (NYSIF). Generally, the Payroll Service will get you set up for this by submitting everything that is necessary. You will get one annual bill from them, and the cost is dependent on the salary you are paying. For an average salary, your Worker’s Comp policy will probably run between $300-$500 annually.

Disability Insurance provides financial support in the event of non-work-related reasons (i.e., illness, maternity leave, accident outside of work). It is a relatively low-cost item and can be purchased through the Payroll Service or independently.

Other Paperwork

Once you have hired an employee, I can help you with all of the set up required with the Payroll Service. If you want to do it, it is quite straight-forward, but it is also a service I am happy to provide. During your employee’s first few days the two of you will need to complete what is called an I-9 Form. This is again very straight-forward; you just fill it out and keep it on file.

Get Started Hiring a Caregiver

This article is intended to help you see that payroll is much simpler than you probably imagine and that you don’t need to do it alone. Our role at Westchester Senior Home Care is to help you easily navigate the set up. We also partner with the household employment specialists at HomePay to support our clients with all the payroll aspects of employing a caregiver.

HomePay offers my clients a free trial which will take care of all the required setup steps (federal & state household employer tax account setup, employee onboarding paperwork) and your first month of service.

As always, I would be happy to help you determine your next best steps. Please call or email me to set up a time to talk.