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Hiring Your Own Caregiver...Here's Why You Shouldn’t


By Greg Adair, Founder of Affordable HomeCare

Recently, the Internal Revenue Service has turned its attention toward the problem of unreported income among caregivers, nannies and housekeepers who work in the home. This is something that has become more and more of an issue now that people are living longer lives and are in need of more care.


Does it Really Matter How I Hire a Caregiver?

Caregivers are usually referred to those they serve by either a registry or an agency. These two business models are incredibly different and those who don't know the differences can find themselves in a world of trouble.

  • A registry is a referral service which does not pay your employees for you, nor does it withhold any taxes or provide Workers' Compensation insurance – these are your responsibilities but they won’t tell you.
  • An agency is a service that employs the people who work in your home. It is their responsibility to supervise and pay the employee, withhold taxes and carry him or her on their Workers' Compensation policy.

When hiring a caregiver through an agency you receive peace of mind knowing that someone else will be responsible for any mistakes come tax time. It is also true that agencies negotiate better deals on Workers' Compensation insurance, which can be quite expensive for caregivers due to the nature of their work.

Can I Find a Caregiver Who is Willing to "Work on the Books"?

Unfortunately, many caregivers who cannot pass agency screenings will at least try to work off the books if they can. Many flat out refuse to pay taxes. There exists an entire economy based on cash among in-home caregivers. Be careful as you can take on a lot of risk.

What if My "Off the Books" Caregiver Files for Unemployment?

If you pay your caregiver under the table and decide to let them go, there is a high likelihood they will attempt to collect unemployment insurance. As soon as your caregiver tells the IRS that you were their last employer the IRS will launch an investigation on you. This will result in you owing the state 3 times the amount of money than if you would have paid your caregiver taxes in the first place.

What if My "Off the Books" Caregiver Tries to Collect Social Security or Medicaid?

This is much like the unemployment claim, but involving the federal government. An off-the-books employee will eventually reach the age to collect Social Security and Medicare. When this happens they will find out no money has been paid into the system and an IRS investigation will be launched targeting all of their past employers. You will be force to pay withholding tax plus penalties and interest which can be substantial.

What if My Caregiver Gets Injured?

Not only are injuries frustrating, due to being forced into finding a replacement, they can also be costly. If you do not purchase Worker's Compensation insurance, you will personally be liable for your caregiver's medical expenses and lost wages. Homeowners insurance will not cover workers in your home.

Bottom Line

Hiring a caregiver privately is not as easy as it seems. To avoid nasty run-ins with the IRS and prevent undo headaches, go with an agency when it comes to your in-home care needs.

Publication is complements of Affordable HomeCare. © 2018 by Greg Adair