I am employing a caregiver to give 24/7 care for my sister. Is a 1099 the only tax form I will need?

Ok - I am all but fired from the POA position. Evelyn denies having signed the POA letter, which of course is witnessed and notarizied, or naming me her POA. She says I'm her executor of estate but as long as she's still alive she'll handle her own financial affairs.

Because she told her bank this, the bank closed down the checking account. Evelyn has to go to bank in person to open a new one.

She's going tomorrow with her home health aid who she met for the first time in November. I've known Evelyn for 50+ years, but she trusts the aid and not me.

Go figure! It will be a relief to be shed of this crazy situation. Today I had calls texts and emails from her HCPOA, her long term care insurance company (2 different people), her next door neighbor, her attorney, and her banker.

Good riddance to this crazy situation. I hope this is final.

IOW, the medical POA uses the same attorney for her own personal legal needs. Not sure if I made that clear or not. That's the reason I decided to consult someone independent of the situation who lives 80 miles away (where I live).

Does this classify as an abuse situation? The medical POA and the next door neighbor who helps Evelyn write the checks believe they are doing the right thing - despite my spelling out in writing and via several phone conversations that no matter how they see it, there are laws that are being ignored. I believe that physically Evelyn is being cared for. I am sure that she does not know she is being misled regarding the way she is paying the caregivers. She may not care about that, however, and I know the medical POA and next door neighbor are trying to persuade her to do things their way, just as they have tried to do with me. I also know that if anyone were to mention the word "abuse" a firestorm would erupt.

Lille, the attorney would likely have to create a Chinese Wall and have someone else in the firm work with you b/c of a potential conflict between your position and the caregivers' positions.

But seeing another attorney is also a good idea. Make that attorney aware of the potential conflict with Evelyn's attorney so there's no accidental communication between the two attorneys.

Good luck, and please let us know what the new attorney suggests. Knowing more about these abuse situations and how to handle them is always beneficial.

It's most definitely the amateur hour in regards to the people caring for her. I have made more suggestions than imaginable, have tried to work w/in the confines of what they are doing, have researched all kinds of things and shared information about every step I've taken including my conversations with the accountant regarding the problem with not taking care of the various administrative processes that are required by law - in return I receive less and less information and believe I am now being intentionally blocked from doing my job as POA.

My point in writing that I could dump the problems back on the attorney is just that the attorney is there if needed, and I'm grateful there is a backup POA who is not another unreliable person. I have discussed this at length with the accountant and have mentioned some concerns to her banks. Yesterday I picked up the last two months of banking statements, and while I had turned on the service that prints the check images each month, it was not working, and I got a list of check numbers without the images. So, I still don't have names of all the people who are caring for her. I suppose I could contact the insurance company to get the paperwork that was submitted by the medical POA, and perhaps that is a step for Monday. I've been to all of her banks personally and gotten to know the people there, but I cannot have online access unless Evelyn approves it. One of the banks had a dormant checking account, so after considerable thinking about doing this, I asked the bank to revive the account and mail checks that I could use for bill paying - the bank would only mail checks to Evelyn's house, and it's been nearly a month, but her neighbor who sorts the mail hasn't seen the checks. I planned to use those checks to pay several outstanding bills - taxes and one from her attorney - that Evelyn hasn't wanted to pay - but that plan was thwarted too. It's been like this all along. Every step of the way I am blocked by bank rules or by Evelyn's desire to continue paying (most of) her own bills or by the people around her.

The medical POA person uses the same attorney. I am not sure how the attorney will react if I report that I see a problem with the private caregivers who have been hired by the medical POA who is also her client.

I am going to consult with an attorney where I live who is independent of this situation, and I may then consult Evelyn's attorney as you suggested.

Thank you for your thorough reading and recommendations regarding this situation.

Lille, thanks for the backstory. I understand being torn between wanting to help someone who was a friend for years vs. the situation now as it's apparently being taken over by unreliable people.

First, as to tax fraud being considered willful misconduct...I have little real life experience with the legal side of prosecuting fraud. I've never worked for a governmental agency that has that jurisdiction, and the law firms for which I worked rarely handled white collar fraud. When they did, there was always a Chinese Wall erected around the client and the attorney and staff handling the matter.

I do recall reading on one of the legal websites I used to visit that proving fraud is more challenging than proving a physical act of criminal behavior. "Intent" is as I recall as major component.

So, and I'm just surmising here, INTENT to commit tax fraud would have to be proven to successfully bring charges against the so-called caregivers (actually, this sounds like real sham/scam, shady operation). How to prove that they knew they were committing fraud? I don't know. That's the sticky issue, i.e., proving intent. Or maybe they're just stupid.

If it were a physical issue, such as someone taking a weapon when going to see someone and then shooting that person, "intent" is more tangible.

I'm sure, however, that the IRS has in its arsenal people experienced in addressing the fraud issue. On the other hand, these so-called caregivers sound like a bunch of amateurs, and it might be hard to prove that they even know what caregiving is.


I think you need to shift focus to what's the best for your friend, recognizing that you're not in a position to ensure that that happens w/o involvement of agencies with more power than an individual.

But I'm concerned about this statement: "Good news is her attorney is named as backup POA and backup executor. So I can always dump it back on her. " I don't think that's a legitimate or reasonable approach. The attorney should be briefed on the situation, and the sooner the better.

If you "dumped" the situation back on her, do you think that's an appropriate way of ensuring care for your friend? Do you think it's fair to the attorney? Don't forget that she can resign as well, and given the situation, she could very well do it. Then Evelyn would literally be like a ship adrift in the ocean.

In addition, I think the attorney would have valid cause to look askance at your own actions for "dumping" the situation on her. The two of you need to work together.

What I would do is contact her, briefly share your concerns and ask for a meeting to discuss the (a) state of your friend's situation and affairs, and (b) professional guidance in proceeding.

It may be that she decides to bring in outside agency help, such as APS. Or she may contact the police. Both actions could be taken by you, but a referral from an attorney as well as the current proxy would make a greater impact on interventional agencies.

Have you discussed this with any of Evelyn's banks, as they would have access to see how the checks were written and to whom they were paid? If someone at the bank suspects fraud, it could contact law enforcement. The disclosure agreements I've read for bank accounts always include the right to share privileged information with legal agencies.

I just re-read the medical POA document. It includes a statement that the medical POA is discharged from any liability "except for my healthcare agent's willful misconduct or gross negligence." Is tax fraud considered willful misconduct?

How do I feel about this situation? Manipulated. But as so often happens, there is much more to the story. I'll try to be brief.

I'll call my 90 year old friend "Evelyn" for short hand. Evelyn's daughter was my best friend from grade school until she died 5 years ago. She lived with her mother from the time her husband booted her out for a girlfriend half his age until she died. (That is another long and multi-state story.) She was very sick when her husband of a quarter century abandoned her. After her daughter died, Evelyn asked me if I would be the executor of her estate when she died. Knowing about all the drama I'd observed, I hesitated but finally said yes.

After her daughter died and she settled her estate (not large but the cheating husband contested that will that left everything to Evelyn), Evelyn had a couple of years of relative calm, though clearly her memory was diminished, but she had a stroke last summer that put her in hospital then rehab for a few weeks. She had never really mentioned the executor role again, so I figured maybe she'd asked someone else to do that. But when her neighbor and a good friend started trying to help her find the paperwork for her long term care insurance, we contacted her attorney, who then told us that she had named me executor plus financial POA, and the other friend as HC POA. The attorney filed the paperwork with the County reg of deeds office. (The long term care company is in liquidation and isn't paying full benefits; another cautionary tale.)

Evelyn's accountant then advised me to get the POA on file with her financial institutions, which number three. That was an eye opener and took so many hours to figure out where her accounts were and what she had. After nearly two months, I had the information and the authority to sign checks at 2 of the banks, but no checks and no credit cards. I also helped get her claim approved with her long term care - but the long term care company is in liquidation, so she has reduced benefits.

Evelyn has refused to give anyone access to checks or credit cards, so several people have had out of pocket expense buying her food and supplies. She insists she is in control of her finances - and the HC POA and Evelyn's next door neighbor are not helping the problem with the way they are operating. 

Evelyn had agency 24 hour care, then reduced to about ten hours a day - agency of course paid the home health aids and filed all the insurance. I talked with HC POA and Evelyn's next door neighbor who are involved (I live 80 miles away so have to travel there or do things by email and phone and by visiting banks there or where I live) because they were interested in possibly moving to private care in future, but I asked that we do this deliberately and interview people etc. and set up payroll. Suddenly they hired people under the table, and as time has gone on, they have shut me out of knowing what's happening, at same time they have friend writing checks and some are bouncing, big bank fees etc.

Evelyn's next door neighbor is helping Evelyn write checks including under the table checks to home health. Evelyn won't pay her property tax, her lawyer's bill, or her estimated income tax for 2017. The home health lead person won't reply to texts or email seeking information about how her business is set up and about taxes. She has a business name but it has no internet presence and is not on secretary of state web site. Recommended by someone's friend at church. 

It's all a big mess IMO. Evelyn's accountant knows what is going on, but her lawyer doesn't.

I can see the HC POA and the next door neighbor doing exactly as was described above, trying to lay blame for anything that goes wrong on me. Like the $180 in fees her bank assessed after she bounced a check she wrote with the help of the next door neighbor. 

Meanwhile I think I know where Evelyn's will is, should she suddenly die, but I'm not sure about that. So the estate could be a big mess too in the end.

Good news is her attorney is named as backup POA and backup executor. So I can always dump it back on her.

I work full time and have lost so much sleep over this, trying to be transparent and do the right thing, but it may not be worth it and perhaps I really should shred the POA letter.

Families sometimes see household workers like nannies, senior caregivers, etc., as independent contractors, not as employees. ... Attempting to classify them as an independent contractor by giving them a Form 1099 is considered tax evasion and does not absolve them of their household employer tax and legal obligations.

You weren't asked to sign an agreement to act as proxy when the POA was executed? (I signed an acknowledgment agreeing to act).

So you have no access to her funds, and no authority to pay bills. How do you feel about being involved in this whole situation?

Bluntly, I can't help thinking that you're being positioned to play the "patsy" when one is needed. Your neighbor didn't ask you if you wanted this responsibility, you have no access to her funds, you're trying to do the right thing by working with her accountant yet are being challenged.

Is there anything positive about this arrangement that would encourage you to continue in it?

The situation between the health care proxy and the caregivers is unsettling. I would stay out of this, as I suspect when things go wrong and the IRS becomes involved, the blame will be shoved off on you.

If this were me, I'd summarize the reasons why this relationship is untenable:

1. You weren't consulted or asked if you were willing to be financial proxy.

2. You have no access to funds anyway.

3. Your recommendations based on conferences with her CPA are being ignored.

4. You have concerns whether the payroll issues are being handled properly.

5. You really have no role except be available for blame.

6. Therefore, you see no justification to remain involved on any level and tender your resignation, effective immediately. And don't even discuss these issues with the friend or caregivers after that.

Just to be on the safe side, before you do this, review all of the issues with which you disagree, and itemize them more than I have. Be thorough so the resignation encompasses all possibilities.

Have someone at yours or her bank notarize and witness your signature and send it to the neighbor by certified mail, return receipt requested.

And obviously keep a copy of it, as well as all the documentation you've done, so that basically you absolve yourself of responsibility for actions over which you have no control.

I would also provide a copy of your executed resignation to her bank, accountant and any other institutions with whom you've interacted.

If she begins making accusations, cut all contact with her.

I see this as a mess right now, with the possibility of becoming more of a mess as well with implications of improper authorization of funds, misuse of funds, and possible elder abuse, as it seems as this woman is losing some of her ability to manage her own finances. I would want to be as distant from this situation as I could when someone makes an accusation, and you can guess who will be blamed. Don't let them make you a martyr.

I have a 90 year old friend who gave me her financial power of attorney and another friend her medical POA. (Her children predeceased her, and she has no other nearby family and set up the POA documents without telling us.) She had a stroke and has some dementia. When she had the stroke is when we learned about the POA documents. She is not ready to give me bill-paying authority, so I actually have no access to her resources. I did submit the POA letter to her several banks and have developed a relationship with them. At any rate, her medical POA and neighbor did not like the agency initially hired for 24 hour care. Last month, they hired private caregivers. Home health workers are employees, not contractors, and a W2 is required. I've read a lot and had extensive conversations w/her accountant about setting up payroll. The private health workers may not be paying any taxes at all, won't reply to email asking how their business is set up, and the medical POA and neighbor have overruled my attempts to talk with the caregivers about setting up payroll. They have the client (my 90 year old friend) writing checks to the care givers. The IRS and other agencies have cracked down on this type of behavior. Long story (very long complex story) short, the medical POA and neighbor are doing as they see fit and imagine that in the future, when our friend can no longer pay her own bills, that I will also write checks under the table. Or that if the authorities ever become aware, that the back taxes and penalties will simply be paid out of her estate. The entire situation makes me very uncomfortable. Every time there is a financial emergency (she bounced a check she wrote to one of the caregivers for example), they all call me and ask me to fix the problem. But as soon as things calm down, they tell me I'm in the way. Any thoughts? It's a very strange situation.

I agree with Claire33. I have not yet sat for my CPA exam, but I DID work for a division of the IRS that handles individual accounts. Repeatedly, I have seen employers attempt to reclassify employees as independent contractors and sneak in a 1099-MISC on employees. The employees WILL CHALLENGE this later when they realize they have basically been underpaid because they are now responsible for ALL THEIR OWN TAXES, including the employer portion.
I spent a lot of time telling people HOW to go about this. Scope of control is a specialty subject for me, and I am here to tell you that it DOES NOT MATTER HOW YOUR BUSINESS IS STRUCTURED, these rules will apply uniformly regarding defining the employee's true relationship to their employer. And 9 out of 10 times, that employee is going to be a W-2 employee.
So roll the dice...when your CP 22 notice when you go to EXAMS and potentially, a full audit.
You might want to consider Mr. Andrew Puzder, the former nominee for Secretary of Labor as a textbook example of what NOT to do.

I called the IRS regarding people who make sure my brother gets his meals and pills but provide no medical services and was told they were home companions and the only thing required was a letter telling them how much they were paid. They said no 1099 needed as my brother not considered an employer and people were considered self employed.

Caregiver versus home companion. It's told me no 1099 or W-2 for home companion. Just a letter telling them earnings then the file schedule C or C EZ

I called the IRS regarding people who make sure my brother gets his meals and pills but provide no medical services and was told they were home companions and the only thing required was a letter telling them how much they were paid. They said no 1099 needed as my brother not considered an employer and people were considered self employed.

I have a caregiver contract and "payment" is secured by a promissory note with real estate as collateral. Do I have to do a 1099 if no $ has changed hands? At the end of 2 years the property will be transferred to me. What is my tax liability/responsibility at that time? I am in NC.

I have a caregiver contract and a promissory note securing real estate as payment. Do I have to do a 1099 since no $ has changed hands? At the end of 2 years, we intend to transfer the real estate to me as "payment". What is my tax responsibility at that time?

Yes, you need to file state and federal tax returns to report your income. I assume you got your full pay with no deductions for Social Security or income taxes. So, you should have realized that this was not right if you thought you were an employee. If you are not an employee you are an independent contractor responsible for having to pay your own SS and income tax. Go to one of the big name tax preparation companies to do your return. Talk to the people who pay you and get this important issue cleared up. You want to be covered for your own future so you will get SS when your time comes.

I was paid private for caregiving the whole year 1200 every 2 weeks i was not given a w2 ever .. i dont know ifni have to fioe taxes i live in california

From IRS pub 15-A regarding Statutory Nonemployees: "Companion sitters. Companion sitters are individuals who furnish personal attendance, companionship, or household care services to children or to individuals who are elderly or disabled. A person engaged in the trade or business of putting the sitters in touch with individuals who wish to employ them (that is, a companion sitting placement service) will not be treated as the employer of the sitters if that person does not receive or pay the salary or wages of the sitters and is compensated by the sitters or the persons who employ them on a fee basis. Companion sitters who are not employees of a companion sitting placement service are generally treated as self-employed for all federal tax purposes."

From questions I've seen on this page I am still not sure about the right answer to my issue. My father is 89 years old and Im his his power of attorney and need to pay a family member and friend for his daily care. I have been using an agency but he is not getting the right care from them and right now I am hiring my unemployed daughter in-law and friend to care for him 5 days a week starting right away but keeping the agency for weekends and holidays temporarily until they can get their business started. Right now I am furnishing the W4 and I-9 for them to fill out and submitting a 1098 form at the end of year until they can get their paperwork is done to be self employed and take care of him for 8 hours/7 days a week. I have been taking care of his home repairs, paying his bills, and running errands and will continue to do so without any pay. When his money runs out in about 5 years he will need to go on medicare. Right now I am trying to keep him at home as long as possible. I am currently paying all of dads bills through his checking account with money he has saved and money his deceased partners left him. My dad relies on me to take care of all the decisions on his care and money spent for his care. My question is am I doing the right thing as far as correct documentation with the W4, I-9, and 1099 forms?

LKB .. the bottom line to this series of questions is whether or not an in-home caregiver (family or otherwise) qualifies for 1099-Misc Non Employee Compensation. Under the guidelines I've found, it would seem so. The clarifications needed are about self-employment taxes (if any).

I would like to point out that the person paying the money is incurring most of the risk if payroll taxes are not properly withheld and timely paid to IRS. There are very obnoxious penalties for failure to withhold and pay payroll taxes. The employee receives 100% and it is not practical to try to get the employee to reimburse you for money you should have withheld in prior years that the IRS is now requiring you to pay. LKB CPA

Claire33, I understand what you are saying and have experience with payroll and withholding. Is there a "ceiling" under which all of this paperwork could be avoided? I occasionally hire a babysitter/companion for my mother (lives in AL, suffering from dementia), for family events such as a wedding so that I don't need to worry about her needs while I am busy with other activities. The payments would fall well under the $600 threshold for a 1099, but would this person be considered an employee? I dictate the work hours and location, but there is no long term arrangement. Would this fall under the companion sitter category that LadeeC described?

Also .. and dang it, I can't find it again .. during my research, either one of the publications or assessments that I read stated that the (non)employer can pay the SE taxes, but include it as part of the 1099 payment. Have you stumbled onto that yet?

So .. how do they define the difference between caregiver vs companion? Publication 15-A states: "... Companion sitters are individuals who furnish personal attendance, companionship, or household care services to children or to individuals who are elderly or disabled..." and the assessment cases from the previous post about 'caregivers and SE taxes' seem to imply that the two terms are interchangeable. Am I reading it right?

It is confuzzling (I like your word).

Companion/sitter -Can be considered as Statutory Non-employee and get a 1099-Misc (Box 7) IF the services are performed under a written contract providing that they will NOT be treated as employees for federal tax purposes and (I think) the payments should not be tied to the number of hours worked, but more of a fee basis.

Caregivers are specifically listed as employees for employment tax reporting purposes and are required to be issued a W-2. They are considered Statutory employees -which includes someone who works in your home. (Common law employees are those who work for a business). Reporting for caregivers is usually done with Schedule H (household) -business employers can use Form 941. IRS Publication 926 can provide more information about this. Social security & medicare taxes are withheld from wages. Those are paid to the IRS with a matching amount paid by the employer. Federal income taxes are not withheld unless requested by the employee AND the employer agrees to do it.

1099-Misc., Box 7 compensation is NOT 'Wages' or 'Other Income'. Box 7 compensation is reported on Schedule C and Form SE is used to calculate Social Security and Medicare tax liability which will be added to the total tax due on the individual's Form 1040. One-half of the SE (self-employment) tax can be deducted from gross income in the 'Adjustments....' section (at the bottom of page 1 of Form 1040).

Since IRS has added the category Companions/Sitters to the Statutory Non-employees, if the person providing the service understands they will have to pay all of their own Social security & medicare taxes and will sign the contract stating they are not employees, give them the 1099. If not, you will have to go with the Sched H.

As for 'family', I think I'd look first at considering the 'gift' amount (no gift tax return required) of $14,000 (28,000 if spouse included) before doing anything else -unless there is a tax purpose for recognizing the wage expense. There is one other ticky thing regarding 'family caregivers', but I haven't figured it out myself yet so I'll not mention it here until I get some more information.

meh ... AARP gave a patent response. *sighs*

LC, that will be interesting information from that call.

hehehe .. I contacted the AARP free tax consult line .. we'll see what they say about it. *crossing fingers*

My advice is to follow what Claire says. My advice is based my my 20+ years in IRS tax collection, including a year of auditing payroll tax returns and determining who was an employee and who was not.