Caregiver completed and signed the W9. Does the W9 relieve me from the responsibility of all withholding taxes on her account ? Am I at risk here for taxes, penalties, and interest? Caregiver says she received 1099's in the past without ever having to file a W9. Please help me understand the "employer" relationship (or lack thereof). She signed the W9 but only after I agreed to pay her 30% more than initially negotiated. Does this sound right?
In my lay opinion, unless this caregiver has a business? The caregiver is an employee, and you must not only withhold Social Security and state/federal taxes, but must pay the employer's portion of the SS and Medicare taxes as well.
Please be aware that, either way, if this caregiver is injured in your home, your homeowner's insurance will not cover her. Worker's Compensation would, however. But that is only available to you if the caregiver is your employer.
Many people don't know/don't care about this distinction. However, if mom has "something to lose," you will want to make sure you handle this the exact right way.
If someone works as an independent contractor, that person is equired to report compensation that exceed $600 annually, which I believe is the minimum threshhold for reporting. That individual may also be responsible for making other payments such as Federal and State estimated taxes, directly, on her own, but it's not an issue which I can address intelligently or knowledgably. It should be verified by contacting the IRS, your state treasurer's office and/or a tax accountant or similar specialist.
As an employer of an independent contractor, it's my understanding that all you do is pay that person directly, then send an annual 1099-MISC (generally) if the annual payment reaches and exceed $600. This is a good synopsis of independent contractor obligations.
https://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Forms-and-Associated-Taxes-for-Independent-Contractors
My understanding is that it's incumbent on the individual acting as independent contractor to do the reporting and take any deductions; all you do is provide the 1099-MISC. That was how it worked when I worked as an independent contractor at law firms.
Alternately, if the caregiver wants to be treated as an employee, you would take deductions and be responsible for the withheld amounts being filed with all of the entities for which deductions are held - federal, state, Medicare, etc. This can be a burden for one employee, which was one of my concerns.
Another was that my insurance agent told me I would need to get a workers' comp policy, which is not available as any kind of add-on or rider to a homeowners insurance policy. It's a separate business policy, and in Michigan would have cost between $750 to $1000 a year.
Without workers comp insurance, anyone working for you who became injured could sue you or your parent or both, and since this person was an employee, not an invitee (a significant legal distinction), your homeowners' policy would not provide coverage.
That was enough to make my decision easy: no independent contractors and no individual employees; agencies only.
Hope this helps.
You are going to have to do taxes, FICA, etc.
There are a whole host of firms that do this for at home help (caregivers, nannies, maids) as so much of this must be reported quarterly. It is one reason why often it is just simpler to hire from an agency as they take care of this plus usually also take care of insurance & bonding issues.
Through my biz (an S corp), I use IC and do between 6 -15 1099's annually. Everbody is an IC as we all work dependent on what the client dictates on a specific project for a set & limited timeframe at a location determined by client. Each year I mail or hand out a w-9, an I - 9, an IC questionnaire & a Determination of residency form (for tax credit states) to everybody that my biz will be paying & I expect everbody to fill them out & return with supporting documentation too; everybody who makes $600 + gets a 1099 in January the following year. If someone won't get the paperwork back to me, my tax gal does a attachment to the 1099 copy sent to the IRS with a noncompliance of SS # requested notification. To me, it's really really important to be on the correct & complete side of anything IRS.
I agree with GA that using an agency for at home workers is best.
It's different than the E-verify too. E verify has to be done on workers if the biz is a government contractor or other large employers.