Home health care nurse

[Kea]

My dad hired a home health care nurse last year after he had surgery. She typically worked through an agency, but Dad hired her directly because he knew what good work she did for a friend of his. She asked for withholding, but since she wasn't going through an agency, I thought it seemed more like self-employment / contract labor. Also, I was just trying to make it easier for my Dad so as not to try to figure out how to do withholding. We only expected her to stay for about a month or two. Well, Dad never made the full recovery we were hoping for and she stayed with him until he passed in January.

She called me last week to get the info so she can do her taxes.

I'm only just now trying to tackle Dad's return - but it has to go on extension anyway (no letters of testamentary yet). I still need to get all his records of how much he paid her (I'd guess $45 - 50K). I'm sure she's never done a return as self-employed before and the tax hit (that's my fault) will be a shock to her. I don't want to do that to her since she asked for the withholding and because she was so good to my dad.

I could put the info on a Sch H now (need to learn about this, too - I haven't done a Sch H since intro classes 12 years ago). But Quickfinders says I need to issue a W-2 with an EIN. He didn't apply for an EIN. If I got one now, it wouldn't be valid for 2008 (already had this issue on someone else's return).

How can I fix this after the fact?

Thanks

[Kea]

help?

[Margaret CPA in OH]

You could still issue a late W-2 with his SSN knowing there will be a penalty. But then beg forgiveness under the circumstances. Then perhaps you could gift to her from your share of his estate an amount equal to the tax due, both income and SE, up to the $13,000 limit for 2009. At least that's probably how I would proceed.

Don't you think she was aware that nothing was being withheld? I would hope that she has something left of that income. And what about state and maybe local tax? I think she needs to accept some responsibility for the situation but you are very generous to take the blame and try to help out. Good luck!

[jasdlm]

I agree with Margaret on filing the W2. I don't think you need to feel responsible for her half of the FICA and withholding. She obviously knew you weren't withholding. If she was expecting to be treated as an independent contractor (which isn't the case given the situation), she ought to owe less than she is expecting since your Dad's estate will now cover the employer 1/2 of the FICA.

[Kea]

I like the gifting idea best. I knew I was putting a burden on her by simplifying for Dad. But if had only been for a month or so, it wouldn't have been too bad. But a whole year of taxes when she's probably never been a contract worker before would be overwhelming. She's a very nice lady and very caring. I would really hate to overburden her after all she did for Dad.

BTW, if anyone needs a home health care nurse in Houston, you can PM me. She is still looking for a job.

[kcjenkins]

Caregivers who work in a taxpayer's home, and who are not hired through an agency, are considered "household help." Their earnings are reported on Schedule H of the payer's income tax return each year, and you are responsible for paying employment taxes (Social Security, Medicare and federal unemployment tax) on their wages. You can either withhold their share of Social Security and Medicare taxes with each payment, or pay it for the caregiver (which effectively raise the caregiver's income).

The instructions for Schedule H state that if you do not have to file a tax return (1040 series), you file the Schedule H as a stand-alone form (preparer signs form) by 4/15/2009.

State unemployment tax also needs to be paid, and this does not go with the income tax return, but must be filed with your state office of unemployment, with which you must register. In some states, you must also purchase a workmen's compensation insurance policy. You need to check this out locally.

[Kea]

Normally she does work through an agency. In this case, Dad hired her directly because he already knew her from when she worked for a friend of his. I didn't do a lot of research into it at the time (OK, none - it was tax season). I didn't want to take the time to figure out how to get Dad set up with withholding. I was lazy and I admit it. Also, I was trying to simplify everything for Dad. And I thought it was going to be short-term. (I know, just excuses.)

This should have been set up last year, but it wasn't. And it won't apply to this year. I'm just trying to fix it now, after the fact. I would be happy to set up a W-2 for her now but as I understand (from Quickfinders) that requires an EIN. If the EIN is created in 2009 it won't apply to wages paid in 2008. Also, I'm not sure I can get an EIN for a deceased person - with the exception of the estate EIN (which I already have).

I also have never had to learn how to deal with TX FUTA laws. Dad is required to file a 2009 tax return but it will be on extension because I do not yet have court documents to sign the return. In addition, I am missing some 1099s that must have gotten lost in the mail forwarding shuffle. If I can get an EIN valid for last year, do I still file the Sch H as a stand alone by 4/15? Again, what about the issue of signing?

Thanks for all the suggestions.

[Lion EA]

Hey, it's April and the situation is not going to repeat. I like the idea about reporting it as it happened (independent contractor) instead of redoing it to how it should've been (household employee) and gifting her some money to thank her for her loving care of your dad (and to help cover taxes). But, if it were me, I don't know what I'd do.