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Several nominees to high government positions have had their opportunities scuttled because they paid housekeepers and caretakers under the table. No names come to mind, but you see it come up every once in a while.
Well, I guess it depends on how you feel about doing the right thing. The lady probably wants cash because she doesn't want any extra earnings reducing her Social Security, and she isn't going to pay tax on it. So she is benefiting in two ways. Is that ok with you? Would you have liked the same deal when you were working? Sure, we all would. But is it the right thing to do?
It's not that much work. You keep up with what you pay her, deduct the Social Security from her pay, then fill out a Schedule H with your personal tax return, and the Social Security tax (FICA)!and the Federal Unemployment Tax (FUTA).is added to your tax bill. You also give her a W-2 at the end of the year, and send the W-3 to the IRS. Done! There's also a way to do it via Form 940 instead of Schedule H, but I didn't look that up.
If you don't want to deduct the SS from her pay, you could just pay the whole 15% yourself...it's only 7.5 % more than you'd have to pay anyway, and it's probably worth it for a HCA who is a good fit.
The fines would be having to pay all the money you should have paid, plus a failure-to-file penalty, failure to pay penalty for each month the amount was due, plus interest.
The HCA would have to file amended tax returns and pay the tax on the amount due, plus failure to pay penalty plus interest.
I find it strange that so many people complain about illegals coming into our country and working without paying tax and Social Security, but they are wiling to look the other way when it's just a small personal situation. It's really no different.
Several nominees to high government positions have had their opportunities scuttled because they paid housekeepers and caretakers under the table. No names come to mind, but you see it come up every once in a while.
Well, I guess it depends on how you feel about doing the right thing. The lady probably wants cash because she doesn't want any extra earnings reducing her Social Security, and she isn't going to pay tax on it. So she is benefiting in two ways. Is that ok with you? Would you have liked the same deal when you were working? Sure, we all would. But is it the right thing to do?
I believe that the HCA is retired and collecting a pension but not yet collecting SS. My friend said that the woman seemed a little reluctant to work so many hours and had just been looking for something part time or short term (to earn a little extra cash).
Quote:
Originally Posted by dlking58
It's not that much work. You keep up with what you pay her, deduct the Social Security from her pay, then fill out a Schedule H with your personal tax return, and the Social Security tax (FICA)!and the Federal Unemployment Tax (FUTA).is added to your tax bill. You also give her a W-2 at the end of the year, and send the W-3 to the IRS. Done! There's also a way to do it via Form 940 instead of Schedule H, but I didn't look that up.
If it is that easy why doesn't everyone do the paperwork?
My friend (who had the part time secretary) was a college graduate with years of work experience and said that he would never attempt to handle the paperwork by himself (so had an accounting firm do it).
Quote:
Originally Posted by dlking58
It's not that much work. You keep up with what you pay her, deduct the Social Security from her pay, then fill out a Schedule H with your personal tax return, and the Social Security tax (FICA)!and the Federal Unemployment Tax (FUTA).is added to your tax bill. You also give her a W-2 at the end of the year, and send the W-3 to the IRS. Done! There's also a way to do it via Form 940 instead of Schedule H, but I didn't look that up.
If you don't want to deduct the SS from her pay, you could just pay the whole 15% yourself...it's only 7.5 % more than you'd have to pay anyway, and it's probably worth it for a HCA who is a good fit.
I'm trying to get this straight. The employer pays 7.5% for SS plus how much for FUTA?
The employee would pay 7.5% for SS plus whatever her tax rate is?
So, $15 cash would probably end up being $12 an hour paid legitimately? (or am I way off on that figure?)
Are there any more extra costs?
Quote:
Originally Posted by dlking58
The fines would be having to pay all the money you should have paid, plus a failure-to-file penalty, failure to pay penalty for each month the amount was due, plus interest.
The HCA would have to file amended tax returns and pay the tax on the amount due, plus failure to pay penalty plus interest.
FUTA seems to be 6%, per the publication. People don't do the paperwork because they are trying to get by cheap. And just because a person is a college graduate doesn't make them good with financial stuff. I don't have a college degree, yet for years I worked for the IRS answering questions on the toll-free line answering tax questions. It's not rocket science.
Also some people hire an accountant to do it because they think they can blame it on the accountant if the IRS finds something wrong. That is incorrect...if the accountant made the mistake, he may offer to pay the penalties due from his error, but you will still have to pay the tax.
Here's a link to the publication that tells all about it. tnis is probably not as hard as some stuff you have to do at work every day.
If you file and pay correctly, here's the breakdown:
$15.00 per hour to the HCA
$ 1.12 per hour for the employers half of the FICA
.90 per hour for the FUTA
Your cost $17.02 per hour.
If you paid her part of the FICA instead of deducting it from her, which should make her happy, add another $1.12 per hour to that. For $18.14 per hour you have a good HCA, you are free from cares about the IRS, and all is well.
What about liablity if the HCA should get hurt on the job? Like lifting the elderly mother and hurt her back etc... Also can't the friend check into Medicare for her mother? They would supply the money for a licensed HCA. Another thought is to take her to an adult day care where they have licensed people to watch her and activities as well.
When you say turnover is 90% what does that exactly mean? Do 90% of the employees leave the field or just leave your agency? That turnover seems incredible high.
It is the agency - HCAs tend to float between agencies frequently, for a variety of reasons. Hours, slight pay increases, bureaucracy. When you earn a low wage, you'll jump ship for small increases. FYI, I'm in a major metro so they have a lot of options. I'm unsure of turnover in a mid or small town. When I hired HCAs to be with vulnerable people, we verified minimum three references, degrees straight from university which included full nursing training (some even had MSc in Nursing, India or Philippines of course)and provided extensive training (and that insurance covers both parties). So, while there was a cost increase, you can see the quality was good too. Those had a much lower turnover - relief and residential disability support was difficult with turnover.
What about liablity if the HCA should get hurt on the job? Like lifting the elderly mother and hurt her back etc... Also can't the friend check into Medicare for her mother? They would supply the money for a licensed HCA. Another thought is to take her to an adult day care where they have licensed people to watch her and activities as well.
To my knowledge Medicare does not pay for home Health Care Aides except for very specific situations (such as several visits of a nurse after the elderly person is released from a rehab facility after a hospitalization). People have to pay HCA themselves.
If you pay an agency $25 an hour for a 40 hour week, you (or your parent) better have $52,000 in the bank to pay for that for one year. And, if your parent needs evening and weekend care or care 24/7 you better have plenty of money saved up.
While adult day cares centers in my community vary from being expensive to fairly inexpensive none of them, at least near where my friend's mother lives, provide transportation. Since they vary from 3 or 4 hours to six hours in the middle of the day it does not help because the adult child is usually working a 8 or 9 hour day (and thus can't drive them to and from the center).
Last edited by MashedPotatoes; 07-04-2015 at 06:17 PM..
If you file and pay correctly, here's the breakdown:
$15.00 per hour to the HCA
$ 1.12 per hour for the employers half of the FICA
.90 per hour for the FUTA
Your cost $17.02 per hour.
If you paid her part of the FICA instead of deducting it from her, which should make her happy, add another $1.12 per hour to that. For $18.14 per hour you have a good HCA, you are free from cares about the IRS, and all is well.
Thank you for the break down. That does not seem like huge difference from the employers point of view.
But, thinking about it from the employees point of view, if she gets paid $15 an hour and then subtracts $1.12 for FICA and, let's guess, 20% for taxes ($3) that has the employee ending up at about $10.88.
And, even if the employer pays the full FICA she gets $12 an hour. Wow, I can see why she wanted to be paid $15 an hour in cash.
I'll be talking with my friend on Monday and can tell her everything that I learned.
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