Family Caregivers and Self-Employment Tax

[allfiredup]

What is the name of your state (only U.S. law)? Georgia

Late last year, I quit my job and moved in with my 94-year-old grandmother as her live-in caregiver. I didn't want to accept any money but my parents insisted. I realized that I needed to make a certain amount ($11,670 for 2015) to qualify for the Premium Tax Credit for Health Insurance. My state did not extend Medicaid coverage for those with low-income, so anyone who earns less than $11,670 gets no subsidy and pays full price for a policy. The majority of those people can't afford it and they are left with no health coverage.

So my parents paid me $1,000/month for my caregiving services. They didn't deduct or withhold any amounts, just paid me exactly $1,000 monthly. My grandmother recently passed away and September was the final month I was paid. I have three small consulting projects lined up between now and the end of November that will pay around $4k, so I'll still end up with over $11,670 for the year.

I understand that I will be owe Federal and State income tax on the money I was paid as a caregiver. But what about Self-Employment tax? I have read the IRS page on the topic and it did not answer my questions. For the record, I have never been employed or trained as a caregiver and do not work in that industry, which is apparently a factor relating to taxes.

Can anyone offer some insight into this? I'm hoping to avoid paying for a tax accountant since my income will only be around $13k, which is about 16% of my previous salary! Any advice or assistance is appreciated!

 

[davew128]

One would think you were a home employee as a care giver and should be treated as such. The rest seems to be self employment to me.

 

[xylene]

Honestly, you should ask your parents to give you a small gift of a paid tax filing by a good accountant.

It can be a headache, and making a mistake when tax is owed can be a terrible burden that can resonate with negative impacts down many years.

 

[FlyingRon]

The problem here is that what is going on is almost certainly illegal on the parents part. The poster is NOT an independent contractor. They should have treated here as the employee she was. Now if she wants to just file the income and SE taxes, that will probably be the end of it, but if she doesn't this may certainly be investigated and the parents become responsible for paying their share of the FICA/medicare.

 

[adjusterjack]

what about Self-Employment tax? I have read the IRS page on the topic and it did not answer my questions.

Rather than read the topic, go to the IRS website and download Schedule SE and Schedule SE instructions. Also look at Schedule C and Schedule C instructions and see if you have any "business" related deductions from income. Even a mileage deduction for running errands for her would help. It would have been nice if you'd kept a mileage journal but you can back into it if the figures are reasonable.

Then fill out the SE and see how that works out.

For the record, I have never been employed or trained as a caregiver and do not work in that industry, which is apparently a factor relating to taxes.

I don't think the IRS will care about that.

On your return you'll likely use NAICS code 624120 - Home care of elderly, non-medical.

http://www.census.gov/cgi-bin/sssd/naics/naicsrch?code=624120&search=2012 NAICS Search

 

[davew128]

Rather than read the topic, go to the IRS website and download Schedule SE and Schedule SE instructions. Also look at Schedule C and Schedule C instructions and see if you have any "business" related deductions from income. Even a mileage deduction for running errands for her would help. It would have been nice if you'd kept a mileage journal but you can back into it if the figures are reasonable.

The OP is NOT self employed. Please stick to topics you know about.

 

[LdiJ]

The OP is NOT self employed. Please stick to topics you know about.

Of course the OP is not self employed. However, it does appear that the OP has been treated as if they were self employed. At this point the OP's employer has passed away so correcting that could be problematic.

OP would need to discuss that with the executor of his grandmother's estate.

However OP, if you do end up having to file a Schedule C and Schedule SE please note that your adjusted gross income will be reduced by 1/2 of the amount of the self employment tax that you pay. Therefore, your income will end up being about 900.00 to 1000.00 less than what you are currently calculating. Therefore if you want to be certain that your AGI is at least 11670.00, you are going to want to make sure that your income is closer to 13.5k than 13k.

 

[FlyingRon]

The employer isn't the dead grandmother, it's the parents who paid her who presumably are still alive and kicking.

 

[davew128]

Of course the OP is not self employed. However, it does appear that the OP has been treated as if they were self employed. At this point the OP's employer has passed away so correcting that could be problematic.

OP would need to discuss that with the executor of his grandmother's estate.

As Ron points out, the estate wasn't the employer. Even if it were, I would not file as self employed even IF a 1099 were issued.

 

[LdiJ]

As Ron points out, the estate wasn't the employer. Even if it were, I would not file as self employed even IF a 1099 were issued.

They would have the option of using form 8919.

I do not agree however that the parents were the employers. I sincerely doubt that they used their own money to pay the OP. I am pretty sure that the funds came from grandma and they paid the OP as grandma's POA. Therefore yes, the estate would be responsible as it would be the responsibility of the executor to handle grandma's final tax returns.

 

[adjusterjack]

The OP is NOT self employed. Please stick to topics you know about.

OK, smart one, how would you report the income and pay the tax on it?

 

[davew128]

OK, smart one, how would you report the income and pay the tax on it?

As wage income as previously stated.

 

[davew128]

I do not agree however that the parents were the employers. I sincerely doubt that they used their own money to pay the OP.

So my parents paid me $1,000/month for my caregiving services.

I think the statement is fairly clear.

 

[LdiJ]

I think the statement is fairly clear.

Its as clear as mud.