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https://www.irs.gov/businesses/small-businesses-self-employed/family-caregivers-and-self-employment-tax


Is there an app or a service that would make the tax bookkeeping easier? A book?

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Basically your Sister will be paid by your mother; your Mother will keep the receipts and will report this as someone working for her on her taxes. This will prevent problems with medicaid lookback if ever needed. Your Sister will report this as income. Kept separate will be things Mom spends for her food and so on. This is something that, no matter cost, you need to work out with an elder law attorney in your state. It may take no more than an hour of time, but it is something you cannot do wrong, cannot afford to do wrong, and a contract should be drawn. Before you and your Sister visit the Lawyer have a set out and ready graft of what Mom will pay in rental, in food cost, in care cost, and etc. I hope others here who are doing this will have advice for you.
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Does anyone use a bookkeeping program?

I recommend Quickbooks, it is user friendly and you can usually get your CPA to help set it up to be compliant with the tax laws. Then someone does weekly or monthly input and downloads for credit cards and bank statements with simple allocation.

Be sure and check for state employment laws and tax liabilities as IRS is only part of the picture.

I highly recommend using a payroll service that handles everything for a percentage of the payroll. They ensure that all the taxes are paid and all insurances are in place, God forbid your sister gets hurt helping mom and finds out her insurance won't cover work related injuries. This also creates a single transaction per paycheck that proves the money was not a gift to a family member, but a payment for a caregiver, avoiding any hassle with Medicaid if ever needed.
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Fotogail, unfortunately, I don't think the concept of "simplicity" enters tax lexicon, or those who create the tax booklets allegedly "explaining" tax issues.

Alva provides a good basis to start.   When you search for an elder law attorney, make sure he or she also prepares taxes, so advice can be tailored to your situation.

What I did for my father's basic taxes (which didn't include caregiving) was to use an Excel spreadsheet, with categories for all income that would be reported on the 1041 or Sch.. B., all deductions for Sch. A, and I linked the sheets so that they were automatically updated.

E.g.,  everytime a medical expense (or charitable deduction, or church donation) was incurred, it was added to the Sch. A sheet, which was linked through Excel to a form 1040, first page.  It was like an ongoing update.  

I don't know of any apps, but I'm not an app person myself.    You could hire a service, but they're probably going to want to handle everything, and that could cost more than you want to pay.


ReallyReal raises a good point on insurance.    Check with your agent, and raise the issue of family providing care in the home.  When I did, I learned that we would have to carry professional liability insurance; homeowners insurance would not cover injuries for paid employees.   This was 3 - 4 years ago; the cost then was estimated to be $750/month, with literal guarantees that the premium would increase annually.  
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FloridaDD Aug 2020
Interesting.  I use a top of the line home owners insurance company, Chubb, and I am allowed one live in care employee under the coverage.  (I don't have any, I use agency)
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