Paying Your Caregiver Under the Table

September 20, 2018

Filed under: Caregiver Issues,Financial,Living at Home — Alexis @ 1:47 PM

Hiring a caregiver is an expense, no question about it.  Some families are lucky enough to be able to find the perfect caregiver among their circle of close family and friends.  When finding a caregiver on their own rather than through an agency, lots of families prefer to pay the caregiver under the table because it’s cheaper than using payroll.  And lots of caregivers prefer direct payments because they make more that way – wouldn’t we all prefer to make more money?

But here’s the problem with this arrangement.  Or more precisely, several problems:

  1. Both the employer and the caregiver are committing tax fraud. You really don’t want to be caught for this.
  2. The caregiver, by not using payroll to pay into her Social Security history, is setting herself up for a lower Social Security payment upon retirement. This will make things a lot harder on her in what are supposed to be her golden years.
  3. The caregiver is not covered by worker’s compensation in the event of injury. That leaves her in a lurch if she gets hurt on the job.  Or, it leaves the family in a lurch, as she can try to sue the employer to recover for her injuries.
  4. The caregiver is not covered by state unemployment benefits when the job ends.

No one wants to pay taxes, and payroll costs add to the employer’s financial commitment and reduce the caregiver’s take-home pay.  But if you run the numbers to see exactly how much the cost changes would be for both the employer and the caregiver, hopefully you will decide that the cost is not as much as you expected, and the protections will be worth it.

As the employer, once you decide to start using payroll, you have options for how to manage that.  If you are an organized person and don’t mind or maybe even enjoy “HR” type of work, you can run payroll on your own and submit the required periodic filings to the employee and the government.  You can use QuickBooks or similar programs to help.  If you don’t have the patience or stomach to do it yourself (I don’t), you can use any payroll agency that works with small employers.  Care.com caters specifically to home-based employers.  (I’ve never used them but love that they are a Massachusetts company.)

If you would like help determining the best way to manage payments to your caregiver, please call us.