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My mother-in law is in a nursing home. We hired a private

My mother-in law is in...
My mother-in law is in a nursing home. We hired a private aide who comes to be with her. We started with the aide last September, 1 hour a day, 3 days a week. Over time we increased it so that by December, she was coming 4 hours a day, 5 days a week. She is paid an hourly rate. The nursing home pays her out of a spending account that my mother-in-law has at the home, and that we keep topped up. We haven’t been doing anything in terms of tax payments.



1) Would she be treated as an employee or as an independent contractor?

2) If she’s an employee, how do we need to deal with taxes for 2011 (and for going forward)?

3) If she’s a contractor, what, if any, tax information do we need to provide so she can deal with her taxes?

4) What about state taxes – all New Jersey.

5) Anything else we should be thinking about?
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Answered in 27 minutes by:
2/1/2012
Charles Markham
Charles Markham, EA, MST, USTCP
Category: Tax
Satisfied Customers: 769
Experience: IRS Enrolled Agent, US Tax Court Practitioner
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First of all, whenever you ask the IRS "Is this person an employee or a contractor?" The IRS will almost answer "The person is an employee". That being said, there are a lot of factors here that would tend to indicate that you are all set. First off, it sounds like the Nursing Home is paying her from their payables. So I would expect the Nursing Home to be responsible for issuing a 1099. But they are really on the hook for this.

 

Now I can expect you would call up the Nursing Home and say "are you sending her a 1099?" and the silence at the other end of the line.

 

Domestic employees and household help are normally for people that work at your home.

 

This person works at a business.

 

Here are what I think are your options:

 

1. Do nothing and sleep well.

 

2. Issue her a 1099 if you verify the Nursing Home isn't. YOu would need her name, address and SSN.

 

All of her personal aid expenses should be a deductible medical cost.

 

Let me know if you have any questions or comments.

 

Charles

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Customer reply replied 5 years ago
Charles,

Thanks for the quick response. I just want to be sure that I didn't mislead you on one item:

You said that "it sounds like the Nursing Home is paying her from their payables." I'm not quite sure what that means, so let me describe the situation in more detail. The nursing home has an account for each resident's miscellaneous spending - say they want to spend $10 at the gift shop, or want to get their hair done, or go on an outing organized by the home. The money in the account is provided from the resident's own funds, or, as in our case, from the funds of a family member. If the money runs out and isn't replenished, the resident can't use the gift shop, get their hair done, etc. As a convenience to us, the nursing home pays the aide every 2 weeks out of that account. If we forget to top up the account, the aide doesn't get paid. I would have thought that the nursing home is simply facilitating the payments, but isn't any more responsible for issuing a 1099 than my bank would be for issuing a 1099 if I paid the aide using a personal check.

Does this clarification change anything in your previous response?

2 related items:
1) If I were to issue a 1099, which am I issuing? I take it a 1099-misc? Where do I get a copy of the form that I can use?
2) You say: "All of her personal aid expenses should be a deductible medical cost." Deductible to whom? I'm paying the aide, so presumably I get the deduction. But isn't there a rule that I can only take a deduction for someone if I provide more than 50% of their support (which I'm not, since I'm not paying the cost of the nursing home, which is the vast bulk of her living expenses).

Thanks!

I understood what the nursing home was doing. And I can appreciate why they would argue that "they are just the middle man" and will not be issuing a 1099. Frankly, that's an argument that many intermediaries would make. I think the IRS would see it differently.

 

My point is that it would not be unreasonable for somebody in your situation to assume that the "Nursing Home was handling it", but you are being particularly diligent.

 

You are looking for Form 1099-MISC, there are number of sites on the internet where you can prepare, print and e-file a 1099-MISC for a fee. I think they still have the blank form at Staples.

 

I assume you were paying the aid from her funds, and she was claiming the deduction. My bad.

 

Charles

 

Charles Markham
Charles Markham, EA, MST, USTCP
Category: Tax
Satisfied Customers: 769
Experience: IRS Enrolled Agent, US Tax Court Practitioner
Verified
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