Caregiver - Family Member - Income Treatment

[geekgirldany]

I have a client that is a caregiver for his grandmother. Grandfather had lawyer setup a Caregiver Agreement which states specifically what care/services my client is to provide him. In return he gets paid $1,000 a month. I've looked this up on line and from reading some articles on lawyer sites it appears that this has something to do with Medicaid and/or making sure he is able to get some type of governmental assistance by paying the caregiver. I asked about just doing a Gift but the lawyer told my client no, that his grandfather would not get the assistance he needs.

Digging a little more it appears that the IRS automatically considers Caregivers as W-2 Household employees and not independent contractors. Since there is an agreement that states what my client must do in caring for his grandfather I assume that he will be treated as a household employee.

I just want to make sure that is correct and that Grandfather will have to file a Schedule H with his Personal Tax Return to pay the FUTA, Fica, Med, Fed Withholdings. I am not sure who is handling Grandfather's tax return preparation but wanted to make sure I have the facts right before I call my client. He is wanting to know how it would affect him tax wise.

Thank you
Dany

[FEDUKE404]

Lots of paperwork for grandpa

I assume person providing the care is aware he will (should) receive a W2 and also will pay relevant income taxes on the payments from grandparents?

And, it goes without saying, the grandparents should be preparing said W2 as well as filing an annual W3 (in addition to Schedule H).

It is possible the grandparents may also have to be dealing with remitting (if collecting) income tax withholding, as well as dealing with FUTA/SUTA timely payment issues. IIRC, the SUTA rules vary between states and many require establishing a SUTA account with the state. I also seem to recall the rules vary as to income levels, but at $12k/year in gross wages I would assume FUTA/SUTA is definitely on the table.

I'm still trying to wrap my head around the grandparent having to spend money to get (free) money, but I guess that's the American way. . .

FE

[S T]

have a client that is a caregiver for his grandmother. Grandfather had lawyer setup a Caregiver Agreement which states specifically what care/services my client is to provide him. In return he gets paid $1,000 a month. I've looked this up on line and from reading some articles on lawyer sites it appears that this has something to do with Medicaid and/or making sure he is able to get some type of governmental assistance by paying the caregiver.

Not sure what the assistance is , however, I have had clients (children/relatives/or other non-related) receive a check from the State for Caregiving, and at the end of the year that person receives from the State a W-2 form. The person receiving the care needs nothing further to report, State is handling and reporting (Medicaid)

If no government assistance, and the person receiving the care (Grandparent, Mother, non related person etc)is paying the Caregiver (your client), then I would say it would be subject to the Sched H and associated State payroll requirements, along with the appropriate W-2 and remittance of payroll taxes, etc.


I am working on one now to obtain VA Assistance for Home Care, whereby the VA will pay, what we aren't clear on yet is whether VA is paying the qualified VA recipient and not taxable, or will be paying the caregiver and it is taxable or non taxable.

I have set several Seniors up with payroll to Caregiver, and all is reported through the Sched H and estimated tax payments, W-2 at end of the year (just as if an employee) - but none of these are receiving any type of Government Assisted Funds.

Keep us posted on your findings with the Govt Assisted payments.

Sandy

[taxea]

How about getting a copy of the contract....details should be in it and they should answer all your questions. If not, send your client to the attorney who set it up and get the questions answered there. When in doubt, go to the source.

[MDEA]

Care giver

My mother in law receives money from VA monthly and she pays care giver.Was told by VA they would not pay direct to care giver.

[geekgirldany]

Thank you all for replying.

My client knows he will have to pay tax on the amount he receives but just doesn't know how it will be done. That is why I wanted to double check about the Grandparent doing a W-2 etc.

I did get a draft copy of the contract, not a signed. I was trying not to go into too much detail about the type of assistance but it is VA exactly as MDEA described.

[S T]

MDEA, thanks for the info on VA assistance

Do you know if these are non-taxable benefits to recipient, and then the caregiver would be subject to the Sched H, W-2 reportings and State payroll reportings.

Sandy

[geekgirldany]

I would like to know also.

Talked to my client this evening. He said that the lawyer handling it all said the arrangement would allow for his Grandparent to get full VA benefits. He said he knew he would have to pay tax but having his Grandparent do the Schedule H and other filings was too much trouble.

[FEDUKE404]

Works for me

I would like to know also.

Talked to my client this evening. He said that the lawyer handling it all said the arrangement would allow for his Grandparent to get full VA benefits. He said he knew he would have to pay tax but having his Grandparent do the Schedule H and other filings was too much trouble.

A most interesting approach to things.

So this means your client, to prevent "trouble," will just forgo the $12k/year income so his grandparent will not have to fill out the required paperwork, and the grandparent will just decide not to receive any further VA benefits.

Yeah, makes perfect sense to me. . . .

FE

[MDEA]

caregiver

The caregiver is thru a service so we avoid having to do the paper work.Was lead to believe that the money from the VA is tax free but then no deduction on schedule A unless it is more than money received.VA money started 01/01/2013 so must see if we receive any paper work from VA.