If you're considering hiring a part-time caregiver to provide support to an aging parent and are paying out-of-pocket, you may be wondering if you need to pay taxes for their services. The answer is maybe. It depends on a few factors, including how much you're paying them and whether they are considered a household employee or an independent contractor.
How Much You're Paying Them
According to the IRS, if you're paying your part-time caregiver less than $2,000 per year, you don't have to withhold or pay any taxes on their wages. However, if you're paying a household employee more than $2,000 per year, then you are responsible for withholding and paying Social Security and Medicare taxes, and federal and state unemployment taxes.
Household Employee vs. Independent Contractor
It's important to know the difference between a household employee and an independent contractor. Household employees are those who work in or around your home on a regular basis and are under your supervision. This includes nannies, housekeepers, cooks, drivers, and caregivers. On the other hand, independent contractors are not under your control and usually provide services that are not related to household work, such as landscaping or plumbing. When you hire an independent contractor, you don't have any tax responsibilities.
Ultimately, it's best to consult with a tax advisor to ensure that you are compliant with all applicable laws.