If I pay a person $1900/month cash for elderly companionship and this person claims these monies as income on their tax return, what happens to me if I had failed to file a 1099 on them? Can they file this as income and pay their taxes without a 1099? Will the IRS accept their income as they state without a 1099? Will the IRS come after me for not filing?

You will be in trouble for not reporting it.

As far as the details... someone more familiar with them will come along and give them soon enough.

You are not required to file a 1099MISC as these are personal expenses not related to a business. The person you paid is required to report this money as income.

Thank you Mr.taxesforaliens.

If, as an individual, I pay a person for elderly companionship, am I required to file anything at all on this person in order to write off the expenses on my tax return? Would this person have to have a particular license or certification to qualify as a tax write off? What would I write the expenses off as? This is actually for my 93yo mom w/ alzheimers who needs someone with her at all times.

Thanks for your consideration.

Wait... you are supposed to report money paid to a housekeeper or maid... even a babysitter once it excedes a very low threshold... why NOT an individual that's providing a service like companionship of the elderly?

I did find this however..

http://www.4homehelp.com/taxpayroll/hwsFAQ.cfm

Specific passage..


IMPORTANT Elder Care Notice: in Coke v. Long Island Care (22-Jul-2004)the Federal Court of Appeals ruled that the FLSA regulations (29 C.F.R. § 552.109(a)) - which specifically apply to "companionship services" provided by other than family members of those receiving the services - are internally inconsistent and not owed the high level of deference usually granted federal regulations. The court found that "companionship services" exemption for home health-care providers should not apply to non-related employees because the intention of the regulation was to exempt companions, not individuals employed to assist with housekeeping and the daily activities of living. There had been several legislative attempts to expand the FSLA coverage applied to 'companions for the elderly and infirm' in the late '90's. Be advised that the professional accreditation of the eldercare worker will likely affect the FLSA exemption. When in doubt, and particularly when dealing with elder care workers with RN, LPN, and CNA licenses, we recommend that you follow the FLSA rules for domestic workers.

Overtime: Effective August 23, 2004, FLSA is amended to require that all workers who make less than $23,660 per year, or $455 a week, be paid overtime. This does not change the treatment of domestic workers, as all domestic employment is considered 'non-exempt' and all wages for domestic employment are subject to overtime.

Thank you Mr smoothy.
This is more in line with what I expected. However, at this point I'm becoming increasingly confused. Could it be true that I need to withhold taxes, SSI & Medicare?

A 1099 would be for a self employed person, so I assumed this person that is paid is self employed.
If that is not the case and the person is a household employee, you would need to pay payroll taxes and issue a W2 (not a 1099) to this person.

If your mom is your dependent and you pay that person so you can go to work, you can take the dependent care credit.

Quote:

---

Originally Posted by rtinvestr

Thank you Mr smoothy.
This is more in line with what I expected. However, at this point I'm becoming increasingly confused. Could it be true that I need to withold taxes, SSI & Medicare?

---

I'm confused myself... it may or may not fall into a loophole. I'm not familiar enough with the specifics here to say either way. I will defer to others that are.

OK. I'm going to try to get enough information out there to make this an easy call.

Mom is 93yo, w/ alzheimers and needs constant companionship.

Mom lives with me, my wife and family. She has her own room.

Mom is not my dependent. She is a fanancially contributing member of the household.

I pay a friend in cash every week to stay with my mom during working hours, 8am-4pm, 4 days a week.

The funds I use to pay my friend are reimbursed to me from my mom's estate.

I do not consider my friend to be my employee, I have always considered her to be more of a private contractor. I have no idea if what I've considered her to be means anything or not.

What makes me an employer or her a contractor?

Am I OK just giving her the cash and expecting that any tax issues are hers to deal with? IOW, do I have any responsibility after payment?

There are no real records of any of this arrangement. Just dirty fingers from handling hundred dollar bills.

Can I deduct the cost of her companionship services when I do my mom's taxes?

I think that does it. Thanks.

Publication 926 might be helpful and will give you some more information how to determine if this person is your employee or an independent contractor.

Www.irs.gov/pub/irs-pdf/p926.pdf

"The worker is your employee if you can control not only what work is done, but how it is done."
If that's the case, you need to pay payroll taxes and issue a W2.(Also see below for an example).
If not, that person would be self employed.
You should start keeping record of anything you pay, as you need those records in case of an audit and the person you pay might have to prove the self-employment income. Get a receipt each time you pay.
Expenses for a caregiver may be deductible as medical expenses subject to the 7.5% AGI limit.




There is an example in publication 926:


Do You Have a Household Employee?

You have a household employee if you hired someone to do household work and that worker is 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.

Example.

You pay Betty Shore to babysit your child and do light housework 4 days a week in your home. Betty follows your specific instructions about household and child care duties. You provide the household equipment and supplies that Betty needs to do her work. Betty is your household employee.

In my opinion, the companion is an independent contractor who must report the income as self-employment income, filing Form 1040 with Schedule C and SE.

Since you are paying her more than $600 per year for services rendered, submission of Form 1099-MISC IS required under IRS regulations.

Thank you all for a very interesting (as far as taxes go) and informative discussion. As all of you appear to have substantial knowledge or well thought opinions on this subject and this sharing has raised several possibilities, I now have what I consider a reasonable awareness to bring to the table in discussing this with my tax preparer. Please don't consider this an end to the thread if you have other insights to offer. I doubt I'll get a meet until late next week. Being able to challenge my preparer's thinking is a tremendous help towards feeling comfortable with this very important aspect of my finances.

Again, many thanks. You all are great assets to this forum and invaluable to those of us seeking educated and experienced discussion.

Glad to help!