Hi and welcome to Just Answer!If you borrowed the money from your parents and now you will pay the loan back - that is not a taxable income.If your parents will hire a person to provide in-home care - that person may be their household employee or a self-employed contractor based on circumstances.If only the worker can control how the work is done, the worker is not your employee but is self-employed. A self-employed worker usually provides his or her own tools and offers services to the general public in an independent business.If an agency provides the worker and controls what work is done and how it is done, the worker is not your employee.
The worker is your employee if you can control not only what work is done, but how it is done. If the worker is your employee, it does not matter whether the work is full time or part time or that you hired the worker through an agency or from a list provided by an agency or association. It also does not matter whether you pay the worker on an hourly, daily, or weekly basis, or by the job.If the worker is your employee - you should become familiar with the IRS publication 926 - www.irs.gov/pub/irs-pdf/p926.pdf
The idea is that I will do the services of a caregiver to repay the money I owe them. Which is considerable. So, if I understand you my working for them to satisfiy the loaned amount is TOTALLY non-taxable because it is a loan repayment.
When you receive the loan - it was not your taxable income - because it was expected to be paid back.Now - it is clear that the loan will not be repaid - and will be used as a compensation for your services - thus that amount becomes a taxable income for you.
So, I will be considered an independant contractor, so I will be the one responsible to the Fed and State income tax, is that correct?
By the law - and based on information you provided - yes - that will be a compensation for services - and if you control how the work is done, you are a self-employed contractor.In this case only you will be responsible for taxes.As a self-employed contractor - you will be able to deduct qualified business expenses - and your net income will be a subject of self-employment taxes (13.3% in 2011) and income taxes based on your total income, filing status, deductions, etc.
Thanks you this has been very helpful.