Discussion:1099-MISC ISSUED FOR IN-HOME HEALTH CARE FOR ELDERLY

(1) Is he required to give her a 1099-MISC? (The IRS publication implied that a 1099-MISC was for nonemployee compensation paid in the course of your business--he has no business)

(2) Can he write any of this off as a medical expense? (IRS Publication states that "You can include in medical expenses wages and other amounts you pay for nursing services. The services need not be performed by a nurse as long as the services are of a kind generally performed by a nurse. This includes services connected with caring for the patient's condition, such as giving medication or changing dressings, as well as bathing and grooming the patient. These services can be provided in your home or another care facility. Generally, only the amount spent for nursing services is a medical expense. If the attendant also provides personal and household services, amounts paid to the attendant must be divided between the time spent performing household and personal services and the time spent for nursing services."

It seems to me that the $25,000 paid to this person should be reported to IRS, and I have discussed this with my client, who is perfectly fine about doing so. And it would be great if we could deduct even a part of it as medical expenses.

Thanks for your response. We looked into the household employee route and noted the difference in this person and the household employee is that she is the one who determines the how, when, and where of what she does. She comes at her own timing, uses her own vehicle for the transportation, etc.

The Publication you referred me to states as follows:

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.

Are we simply stretching to try to report this in the easiest manner?

Thanks for your time.

Thanks for taking your time to help with this. The problem we have at this point in going a W-2 route is that no "employer" taxes were paid throughout the year. No employer Social Security/Medicare, no Virginia unemployment taxes, no employee Social Security withholdings, etc. How do you remedy that at this late date?

You needn't issue a 1099 or W2 if the person is incorporated, invoicing you for the work done. I suggest they consider incorporation (as an S-corp) to get out of this going forwards.

If they are in the business of providing these services, and have several clients, and issue invoices, but they are not legally incorporated, then a 1099 is appropriate.

If they do not do this for a living, or your dad is the only client, you will have to file a W2. On the plus side, you could pay the withholding taxes for them now, and that becomes taxable income to them next year. Consider it a bonus for a job well-done.

1. Report wages - EE is Pd 1,250 semi-monthly and lives on T/P premises caring for T/P's spouse

   who has alzheimer's and was being paid without any deductions.  They want to continue paying
   EE $1,250 so I grossed up her wages as follows:

     Gross:          $1,405.27
     Less: Fed W/H     (155.27)    Per W-4: S-1
       Net            1,250.00
  
   T/P wants to make no changes to EE's net pay so they will pay EE's share of all P/R Taxes.

   Also since there is no 941 reporting or tax deposits due, T/P will pay all P/R Taxes on Sch 
   H and file with 1040 by 4/15/09.

2. As for Medical deductuion, I am having T/P docuement EE's hours for a given week to

   determine % is for caring for patient for allocating Gross P/R and ER Taxes and what % 
   is personal.  Also using caring % for 
     a.  Estimated FMV for Room Rent
     b.  R/E Taxes, Utilities, Home Ins
   Similar to InHomeOffice deduction 

This way everything is legal plus T/P is able to deduct a portion of her EE's cost as medical.

Comments/Suggestions?