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Tax Status for Home Care Employee W-2 vs. 1099

Updated: 16 hours ago





Let's dive into the topic of employee tax status and clear up some common misconceptions, shall we? Many people think they can just hand out 1099 forms and avoid paying employee taxes, but it's not that simple. When it comes to IRS definitions, things get a bit more complex. Let's break it down!


It's crucial to understand that using 1099 forms might not align with the requirements for in-home caregivers. Sure, it might save you some money in the short run, but you don't want to risk it. The IRS' definition for a 1099 contractor means that it's an individual who works for themselves and pays their own self-employment taxes. If you're already using 1099s, take a step back and reassess. Consult with your CPA or accountant to ensure your business practices are in line with IRS standards. Remember, the IRS rules are not to be taken lightly!


One key point to note is that the IRS emphasizes that the payer (that's you, the agency) should only control the result of the work, not the specifics of what is done or how it's done. Ultimately, the IRS looks at the substance of the relationship between you and your workers. If you have control over what work is done and how work is done, they're considered employees, which means W2 status. It's all about the nature of the employer-employee relationship, not just the labels you use.


You as an agency dictates the following work aspects for your field caregivers:

Orientation to agency policies and state requirements

Training, initial and ongoing

Schedules, clock-in and clock-out times per client requests

Care Plan or Service Plan based on the client's needs and requests

Evaluations of performance

Supervision of work

Disciplinary action as appropriate


All these requirements contradict the use of 1099s, especially in regulated states, therefore these employees must be W-2 employees. Remember, contractors represent themselves, while employees work on your behalf. If you're not sure where you stand, it's better to switch to W2 status sooner rather than later. Don't wait for trouble to knock on your door! Read more about this from the IRS.


If you have any questions or need further guidance, feel free to reach out to us at questions@slusherconsulting.com. Good luck on your compliance journey!


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