What are the Payroll and Tax Rules for Senior Care?

Sep 15, 2023 | Payroll, Taxes & Labor Laws, Senior Care

Have you hired a senior care employee to work in your home? Follow this senior care payroll and tax guide to ensure you are compliant with employment rules.

Step 1 – Determine if you have an employee or independent contractor

The main difference between an employee and a contractor is that an employee operates under the control and supervision of his/her employer (you), and a contractor retains all control over themselves and their services.

Step 2 – Research Tax Laws

The IRS states that anyone paying an individual $2,600 or more (2023) in gross wages during the calendar year legally employs a household employee and must comply with all state and federal tax laws pertaining to household employer status.

Step 3 – Follow Payroll Regulations

According to the Federal Labor Standards Act (FLSA), all senior care employees must be paid at least minimum wage. However, benefits such as room and board can account for a portion of that wage. There is no limit to the number of hours an employee can work – provided there is a mutual agreement. Overtime may be required in your state. Paid vacations, holidays and sick days are not required by law.

Step 4 – Submit Federal and State Forms 

  • Complete SS4 Form for an Employer ID #
  • Register for State Unemployment ID #
  • Register for State Withholding Tax ID #
  • Complete your State New Hire Report
  • Have employee complete W-4 Form
  • Have employee complete I-9 Form

These can be downloaded from our payroll partner GTM Payroll Services.

Step 5 – Add Workers’ Compensation to Your Insurance Policy

New York State requires household employers to carry a workers’ compensation and/or disability policy if you employ someone on a full or part-time basis. These policies will protect you from lawsuits and liability in the event that your employee is injured on the job.

Step 6 – Set Up Dependent Care Assistance

You can pay your senior care employee with pre-taxed funds through an employer-sponsored Dependent Care Assistance Program (DCAP), if your employer offers this plan. A plan of this type would allow you to set aside up to $5,000 per year “tax free” money that you can use to pay for senior care. Contact your employer’s Human Resources department for more details.

Step 7 – Calculate Withholding Taxes

Our payroll partner GTM Payroll Services offers a free wage calculator on their website.

Step 8 – Distribute Paychecks Regularly

You have the option of paying your employee weekly, biweekly, semi-monthly, monthly, or at any other agreed upon interval. Wages should always be paid via check so both parties have a record, and the amount should always be net (after all applicable taxes are withheld). You can also offer the option for direct deposit (check with your bank for details).

Help with Hiring Senior Care

A New England Nanny has professional, experienced, thoroughly screened caregivers to provide in-home senior care services. They can assist with non-medical activities like running errands, appointment transportation, cooking, laundry and cleaning, and more. For more information, contact us at (518) 348-0400.

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