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Thread: PCA ? Out of Pocket

  1. #1

    PCA ? Out of Pocket

    This question came up when I was talking to a friend and read a post from another CC member:


    If you pay for your care out of pocket could you email me? I understand not wanting to air your life here. I will keep it confidential.

    I'm interested if you pay taxes for them?
    If so how?
    Is this required?
    How many hours do you need one?
    yadda yadda

    A fellow quad is paying 500.00 a week out of pocket. He works f/t, obviously a good job not on SSDI, but now he's having health issues and will need to cut back. I have no clue what to tell him. His local ILC told him @ trusts but his parents are getting old and I don't think he "trusts' anyone else with his money. He has a condo in the city, a van, takes vacation etc.

    You think after 25 years I would understand this shit. but I'm at a loss . Anyone care to share?
    Last edited by Liz321; 11-06-2005 at 04:21 PM.

  2. #2

    Two questions

    Why would an employer pay an employee's taxes?

    Mustn't you file regardless of income? You might want to check into that for yourself.
    C5 injury with partial C6 function on left.

  3. #3
    Quote Originally Posted by Lewis
    Why would an employer pay an employee's taxes?
    .
    Because an "employer" witholds your taxes and must pay their portion as well. It's the law.

  4. #4
    Senior Member
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    Pay them as subcontractors then they are responsible for everything. Issue a 1040 for medical instead of w-2

  5. #5
    Senior Member MZack's Avatar
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    Quote Originally Posted by Cris
    Pay them as subcontractors then they are responsible for everything. Issue a 1040 for medical instead of w-2
    It's not nearly that simple. You can't just decide to pay them as subcontractors and be done with it. At least not lawfully. I'm certain that in the vast majority of cases, privately paid PCA's are household employees, NOT independent contractors.

    See various IRS Publications, found on the IRS website:

    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.

    Example.

    You pay Betty Shore to baby-sit your child and do light housework 4 days a week in your home. Betty follows your specific instructions about household and child care duties. You provide the household equipment and supplies that Betty needs to do her work. Betty is your household employee.
    Household work. Household work is work done in or around your home by the following people.

    • Baby-sitters
    • Cleaning people
    • Drivers
    • Housekeepers
    • Nannies
    • Health aides
    • Private nurses
    • Maids
    • Caretakers
    • Yard workers
    • Similar domestic workers

    Workers who are not your employees. If only the worker can control how the work is done, the worker is not your employee but is self-employed. A self-employed worker usually provides his or her own tools and offers services to the general public in an independent business.

    A worker who performs child care services for you in his or her home generally is not your employee.

    If an agency provides the worker and controls what work is done and how it is done, the worker is not your employee.

    Example.
    You made an agreement with John Peters to care for your lawn. John runs a lawn care business and offers his services to the general public. He provides his own tools and supplies, and he hires and pays any helpers he needs. Neither John nor his helpers are your household employees.
    More information. More information about who is an employee is in Publication 15-A, Employer's Supplemental Tax Guide.


    From IRS Publication 15-A, Employer's Supplemental Tax Guide:

    Misclassification of Employees

    Consequences of treating an employee as an independent contractor. If you classify an employee as an independent contractor and you have no reasonable basis for doing so, you may be held liable for employment taxes for that worker (the relief provisions, discussed below, will not apply). See Internal Revenue Code section 3509 for more information.

    Relief provisions. If you have a reasonable basis for not treating a worker as an employee, you may be relieved from having to pay employment taxes for that worker. To get this relief, you must file all required federal information returns on a basis consistent with your treatment of the worker. You (or your predecessor) must not have treated any worker holding a substantially similar position as an employee for any periods beginning after 1977.

    Technical service specialists. This relief provision does not apply for a technical services specialist you provide to another business under an arrangement between you and the other business. A technical service specialist is an engineer, designer, drafter, computer programmer, systems analyst, or other similarly skilled worker engaged in a similar line of work.

    This limit on the application of the rule does not affect the determination of whether such workers are employees under the common-law rules. The common-law rules control whether the specialist is treated as an employee or an independent contractor. However, if you directly contract with a technical service specialist to provide services for your business and not for another business, you may still be entitled to the relief provision.


    2. Employee or Independent Contractor?

    An employer must generally withhold federal income taxes, withhold and pay social security and Medicare taxes, and pay unemployment tax on wages paid to an employee. An employer does not generally have to withhold or pay any taxes on payments to independent contractors.

    Common-Law Rules
    To determine whether an individual is an employee or an independent contractor under the common law, the relationship of the worker and the business must be examined. In any employee-independent contractor determination, all information that provides evidence of the degree of control and the degree of independence must be considered.

    Facts that provide evidence of the degree of control and independence fall into three categories: behavioral control, financial control, and the type of relationship of the parties. These facts are discussed below.

    Behavioral control. Facts that show whether the business has a right to direct and control how the worker does the task for which the worker is hired include the type and degree of:

    Instructions that the business gives to the worker. An employee is generally subject to the business' instructions about when, where, and how to work. All of the following are examples of types of instructions about how to do work.

    • When and where to do the work.
    • What tools or equipment to use.
    • What workers to hire or to assist with the work.
    • Where to purchase supplies and services.
    • What work must be performed by a specified individual.
    • What order or sequence to follow.

    The amount of instruction needed varies among different jobs. Even if no instructions are given, sufficient behavioral control may exist if the employer has the right to control how the work results are achieved. A business may lack the knowledge to instruct some highly specialized professionals; in other cases, the task may require little or no instruction. The key consideration is whether the business has retained the right to control the details of a worker's performance or instead has given up that right.

    Training that the business gives to the worker. An employee may be trained to perform services in a particular manner. Independent contractors ordinarily use their own methods.

    Financial control. Facts that show whether the business has a right to control the business aspects of the worker's job include:

    The extent to which the worker has unreimbursed business expenses. Independent contractors are more likely to have unreimbursed expenses than are employees. Fixed ongoing costs that are incurred regardless of whether work is currently being performed are especially important. However, employees may also incur unreimbursed expenses in connection with the services that they perform for their business.

    The extent of the worker's investment. An independent contractor often has a significant investment in the facilities he or she uses in performing services for someone else. However, a significant investment is not necessary for
    independent contractor status.

    The extent to which the worker makes his or her services available to the relevant market. An independent contractor is generally free to seek out business opportunities. Independent contractors often advertise, maintain a visible business location, and are available to work in the relevant market.
    How the business pays the worker. An employee is generally guaranteed a regular wage amount for an hourly, weekly, or other period of time. This usually indicates that a worker is an employee, even when the wage or salary is supplemented by a commission. An independent contractor is usually paid by a flat fee for the job. However, it is common in some professions, such as law, to pay independent contractors hourly.

    The extent to which the worker can realize a profit or loss. An independent contractor can make a profit or loss.

    Type of relationship. Facts that show the parties' type of relationship include:
    Written contracts describing the relationship the parties intended to create.
    Whether or not the business provides the worker with employee-type benefits, such as insurance, a pension plan, vacation pay, or sick pay.

    The permanency of the relationship. If you engage a worker with the expectation that the relationship will continue indefinitely, rather than for a specific project or period, this is generally considered evidence that your intent was to create an employer-employee relationship.

    The extent to which services performed by the worker are a key aspect of the regular business of the company. If a worker provides services that are a key aspect of your regular business activity, it is more likely that you will have the right to direct and control his or her activities. For example, if a law firm hires an attorney, it is likely that it will present the attorney's work as its own and would have the right to control or direct that work. This would indicate an employer-employee relationship

  6. #6
    I have had pca's work as Independent Contractors and provided them a 1099 at end of year as well as "Employees" who get w2's. Independent Contractors are NOT encouraged by the IRS in the PCA situation, however it is my understanding there are provisions. To protect yourself as the "payee", make the IC sign an agreement with you stating they accept full responsibility for paying taxes at the end of year. Unless they have prior IC tax bookeeping experience or able to put back 20% of each check you give them wages for, I'd be leary.

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