Major life milestones often have a major tax impact. Changes in your marital status, having a baby or adopting a child can have significant impact on your taxes. This is the place to ask questions about dependents, real estate, and other various scenarios that play a significant role in what taxes you pay.
05-18-2017 07:57 AM
05-18-2017 05:26 PM
Welcome to the H&R Block community.
There are actually a few things you should be aware of here.
First, if you pay an employee, in this case a caregiver, more than a certain amount for the year your are REQUIRED to issue either a Form 1099-MISC or a Form W-2 to that employee. A caregiver can be considered a household employee, in which case you must issue their income form if they earn more than $2,000. Note that a household employee is one for whom you can control their work and how & when the work is done, and one who works in your house on a regular basis. A service guy from an air conditioning company who comes out once in a year for example is not a household employee. However, babysitters, assisted living caregivers, pet sitters, nannies, and several others can be household employees. If your caregiver does not fall into the household employee category then you must still provide them with a Form 1099-MISC if they earn $600 or more as they are still an independent contractor who is working for you regularly.
Household employee payroll taxes are calculated on Schedule H and paid with your tax return if the employee elects to be issued a Form W-2 at the end of the year. Their social security & Medicare taxes must be withheld by you and paid with your tax return in February. Note that if you expect to owe more than $1,000 for the year with your tax return you must make estimated payments on April 15th, June 15th, September 15th, and January 15th.
There are two deductions that you can take for the care of a family member. The first one is the Schedule A deduction for medical expenses which includes anything medically necessary. Expenses for assisted care can be deducted under the Schedule A deduction and you do not need the caregiver's information for this deduction.
The other option is actually a tax credit for dependent care. The dependent care credit can be claimed for the care of an elderly family member, usually a parent, who cannot care for themselves. For the dependent care credit you will need the care provider's information in order to complete the Form 2441. The credit is however almost always worth more than the Schedule A deduction because it reduces your tax liability dollar for dollar.
Finally, note that if you take the dependent care credit then you must reduce your total expenses for the Schedule A medical expenses deduction by the amount you entered on Form 2441 to claim the dependent care credit. So, if you claimed $3,000 worth of expenses on Form 2441 and you had a total of $9,000 then you can deduct $6,000 on Schedule A.
If you have any other questions I'll be glad to help.
Senior Tax Advisor (Tampa, FL)