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I am wanting to hire a caregiver and pay them cash. Are there any laws/rules I need to be aware of?

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If you mean cash under the table you must know that is against the law in any situation.
And those willing to work that way are more apt to be dishonest themselves, or desperate enough that they are willing to give up the protection of labour laws and their ability to contribute to social security.
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BurntCaregiver Dec 2022
@cwillie

No, you are wrong about people being more "apt" to be dishonest themselves if they accept cash.
Caregivers who work for an agency don't make any money and their agencies screw them over at every turn. So they work a little on the side in cash to keep the lights on.
Or a married person who is on their spouse's insurance and
doesn't have to work a job for the benefits will appreciate a cash position too. Doesn't mean your LO won't get top shelf care or that the caregiver is some kind of criminal who will rip you off. They're not.
People hiring in-home caregivers should be less concerned about what way they get paid and be more concerned about checking up on their references, skill set, criminal back round check, and drug testing.
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When you hire an aide, you need to look towards the future.

The IRS does not look at aids as self-employed. The IRS looks at you as the employer who should be taking out payroll taxes.

The other problem is...will Medicaid LTC ever be needed. If so there is a 5 year look back in most states. A large amt being withdrawn weekly maybe questioned.

I would check with your Labor Board how Aides are handled. If after you are made aware of how it all works you still want to pay cash, thats between u and the aide. Do not keep large amounts of money in your house unless you have it safely put away.
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When managing any estate, you need to do everything with complete transparency and tight record-keeping. If you want to pay the aide with monies you would otherwise allocate to yourself, just keep those records clearly.

No professional agency will allow cash payments so it would mean hiring an unknown to care for your LO.

I wouldn't do this myself and find the idea ill-advised. This goes against labor laws and would be of benefit to no one.
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Be careful about cash as it is a clean, transparent payment method. Paying by check is the legal way for record keeping, such as withholding for income taxes, etc.

Very detailed records are required to legally spend down to Medicaid eligibility that has a lookback period average of 5 years, and spenddown period depends on where you live. In California, it is called MediCal that requires a lookback timeframe of 30 months.
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Oops, Tried to cancel this post as I just repeated myself!
Payments by checks are legally required for record keeping.
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I agree with cwillie. Pay with a check.
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Discretion. That's pretty much the rule. If the caregiver wants cash and you're fine doing it that way (and many people are because it makes things easier for everyone) then make an arrangement.
If you're going cash, literally pay in cash. Never by check because then that's a paper trail left behind.
Agree upon a payday every week then give the caregiver an envelope of cash.
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Hothouseflower Dec 2022
We pay cash, our aides get paid on a daily basis. Just easier for us to do it this way.
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Well this depends on a number of things.

Is the cash being paid from your LO or you personally and NOT associated w/their accounts? If at a later date paid by your LO/from their accounts and later your LO needs to qualify for Medicaid those cash withdrawals w/no receipt could impact later Medicaid qualification as others have said. If there is lots of money and it is unlikely Medicaid will come into play OR if you personally are paying out of your own personal funds NOT tied to your LO and have lots of money to keep that up for the entire run of their need, then that is a different story.

Also, how long is this cash payment plan likely to go on? A couple of weeks is one thing, a year or more is a different matter.

Yes, technically if one "hires someone" for a job (State and Local laws/rules are different and there are Federal laws/rules too) there are tax and benefit compliance issues (tax withholdings, Social Security and Medicare withholdings, in some cases payment into state workers comp funds or health insurance benefit payments that need to be made by the "employer"). Each State and locality has different laws and rules. SO YES this exists and only an attorney licensed in your state could advise you properly of what those laws/rules are and what if any legal issues may arise out of the cash payments. And one has to choose, does one comply or not with those laws/rules; and what risks OR downstream problems may arise if NOT following those laws/rules. PS "ignorance is not a defense" in legal matters.

Hiring through an agency, handles all of these matters but that does NOT mean one should ONLY go through an agency.

As others have said, how to pay the aide is one part of consideration. Is that aide qualified to do this care? What is the plan if the aide is ill or wants to go on vacation (who fills in, agencies work that out for you)? What if any background checks have you done? What if any legal agreements (not just verbal) have you written out between the two of you so there is not a conflict or controversy later? What type of input/follow up do you expect, weekly updates about your LO? Lots to consider.
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You will be required to fill out 1099 - Nec forms for tax purposes if you are hiring someone for any length of time. You must keep clear transparent records for your LO's taxes.
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I know of ppl who have paid with cash under the table going into their third year now. These are pros from their perspective.

They get a lady who cooks them delicious homemade dinners from scratch, knits quietly rather than be on a mobile device. They love her. 105 hours a week, 25 an hour. One person, no vacation, on for 7 days a week.

Not withholding taxes means she takes more home. If on Medicaid, who would ever know she’s bringing home six digits annually?

No ones caught them, so for now they benefit.
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Isthisrealyreal Dec 2022
See I'm a bitty, I would turn her in for Medicaid fraud and tax evasion. You don't get to collect from the system and defraud it at the same time.

This is the behavior that is ruining our social programs for the truly needy.

I would rather my tax dollars pay for incarcerating these thieves.
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Justperforming, you can hire someone and pay cash and it's all well and fine, until it isn't.

If the caregiver gets injured while working, they more then likely will NOT be covered by your homeowners insuramcd and if they are, it is very minimal for medical. Now it isn't all well and fine.

The caregiver or yourself gets audited and it comes out they have been receiving cash for work, it could fall on you to make up back taxes, including fines and penalties. Now it isn't all well and fine.

Your husband's care becomes to much for you and the caregiver and he needs Medicaid to be able to go to a facility. Now it isn't all well and fine.

These are just a few things that can go sideways with paying cash.

Only you know the true situation.

When I was looking for a caregiver for my dad, I found out she could spend 50 bucks to get a business license and then ALL the burden was on her for taxes and insurances. I offered to pay for the license. That was in AZ, so you have to check what is permissible in TN. I got this information through my insurance broker.
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PeggySue2020 Dec 2022
This is a creative solution to staying legal.

However, there are hordes of people who mutually agree on going under the table. If, for example, the worker is on Medicaid as she’s collecting over 100k a year, why would she need to involve their homeowners if something happens at work when she’s allegedly not working?

I know of people who have had whole careers doing this and raked in hundreds of dollars more than they would have by going legal.
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Having been an independent contractor for most of my life, it is my understanding that it is / was up to the recipient to report cash as part of my income when filing tax returns. If your caregiver is through an agency, ask them.
* One client I had rec'd tax breaks due to hiring me and she provided me a W2. No other client, of many, did that. As an independent contractor, I kept / keep accurate records and report accordingly.
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my2cents Dec 2022
If you are a contactor, you would get a 1099 from people you work for. One copy to you and one to the IRS to ensure all income is reported and taxes paid. It is intended to reduce/prevent unreported earnings that people don't pay taxes on.
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I second all the above answers and add the fact that you have nothing to prove you paid them.

They could come along and say they were never paid. You’ll have no proof and no paper trail for how the cash was used.
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Justperforming: Perhaps this wouldn't be a good idea for many reasons, e.g. There is no record of said transaction., Are they reporting said income on tax returns and if so, are you, the EMPLOYER, withholding federal and state taxes?, et al.
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Probably not a good idea. Cash payments might create unreported earnings for the employee and get you in a mess should they get into an audit.

Here's how things could go sideways: A person claiming disability wants cash payments so that SSA will not cut them off. At some point, someone turns them in for not reporting they are working and then your name pops up. Let's say someone does have other jobs where income is reported. They file taxes and get audited - they reported more expenses than they had income. Your name finally explains where the other income came from. And then there is always the need for a Medicaid bed in a NH should you no longer be able to live alone. Medicaid looks back 5 years and they ask you what the withdrawals from bank account each week/month were for. It might look like you were gifting money to that person, which would delay being able to have Medicaid pay for the bed.

You may have a lot of money and never have to go the Medicaid NH bed route. However, there are always folks who will turn someone in for unreported earnings and you might not want to be a party to helping someone do that. Up to you.
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@Isthisrealyreal

I must disagree about caregivers getting paid in cash ruining our social programs for needy people.
No, what's really ruining our social programs for needy people is the way the hospital, nursing home, and care industryare allowed fleece and violate Medicare and Medicaid without restraint. It's Washington lobbyists who fight tooth and nail to prevent the American government making a law that Medicare and Medicaid can negotiate with drug companies to get the best price on something.
This is what's ruining our social programs for the needy. You wouldn't be alone in your thinking though. People can't stand it when the little guy gets a taste once in a while and can maybe get ahead a little bit without giving a cut to Uncle Sam. Yet, when the very rich fraud, lie, and steal on a huge scale folks call it business.
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Isthisrealyreal Dec 2022
Burnt, of course you disagree.

If you wouldn't take my post out of context your response would be a moot point. I was specifically referring to peggysue's inlaws caregiver that not only gets paid 120k but, she is a live in, so she has no expenses, yet gets Medicaid. Thief!

Anyone earning 120k a year, is a thief if they collect welfare because they are being paid under the table.

I know what Washington does and it is reprehensible but, that doesn't justify ANYONE taking social services and earning that kind of money.

I don't think anyone should punk the system to get taxpayer dollars, not anyone. But, because people like you believe that not contributing and then collecting against the very system they object to paying taxes too is acceptable, it has become unsustainable. It is criminal and I would rather my tax dollars pay to incarcerate them. Even the dirty politicians on both sides that punk the system should be incarcerated for breaking the law.
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Are you the one who requires care? Or is it for someone else you are caring for? If it is for someone else, that recipient should be paying for hers or his care, not comingled from your own funds for future Medicaid rules.
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Isthisrealyreal Dec 2022
It's her husband Pat.
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If the reason why you are wanting to pay cash is so that you don't have to report that you are an employer (and pay your portion of social security tax), that can get you into some serious legal trouble. Look at Topic 756 Employment Tax for Household Employees in the IRS publications.

However, if who you are hiring says that they are an individual contractor and they are self employed (therefore they are paying both portions of social security tax and filing a Schedule C) then you are in the clear. However, for your sake, I would have them document it in writing to you and renew it each year that they are truly an independent contractor and that they are paying all applicable taxes regarding their employment with you.

Why they prefer cash is none of your business. As long as they do a good job with your husband and the money is traceable, you are okay. My sister-in-law wanted to be paid in cash and she was self-employed. The reason for the cash was because she didn't have time to visit the bank to get cash.

For your sake, I would be upfront and law abiding, when hiring someone to help you. Make sure you keep record of all the cash payments you give to them. You might need the proof sometime in the future, like as a deduction for medical expenses on your tax return. If IRS suspects fraud, there is no statue of limitations...they can go back as far as they want. From an employee side, if they wanted to apply for a loan, they will need records to show that they are earning money.

BTW-- do a google on Nannygate
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JoAnn29 Dec 2022
I am under the impression that aides are not considered self-employed by the IRS. They are employees and need to have deductions made from their pay.
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We pay legal for Mom(via check through accountant social security taken out, workers comp, etc)

Several of our caregivers have worked cash gigs.

IRS caught one caregiver as she was depositing all of the cash in her bank. Both caregiver and
employer paying cash paid about $6000 in penalties to the IRS.
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If you look at the IRS code it is illegal (if you do the scheduling) to pay caregivers as 1099 employees.
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