Tax and Legal
Legal
The federal laws that cover domestic live-in workers are found in the Fair Labor Standards Act (FLSA). This law from 1938, has had major revisions in 1974 and 2013. The 2013 changes (which didn’t take effect to 2015) took away the companionship exemption for “third party employers” of live-ins. That meant that home care agencies had to start paying their live-in workers OT after 40 hours.
Most agencies stopped offering live-in care as a service in 2015, and switched to only offering the much more expensive 24 hour care as an alternative.
If you would like to read up on the law, click here. It goes over the requirements for families to receive the companionship exemption (not pay over-time), and not have to pay for the live-ins 8 hrs of sleep-time . See below for some excerpts.
Q:”What is the companionship services exemption?
A. Congress explicitly extended FLSA coverage to “domestic service” workers in 1974, amending the Act to apply to employees performing household services in a private home, including those domestic service workers employed directly by households or by companies too small to be covered as enterprises the Act. While Congress expanded protections to “domestic service” workers, the 1974 amendments also created a limited exemption from both the minimum wage and overtime pay requirements of the Act for domestic service workers employed to provide “companionship services” for elderly people or people with illnesses, injuries or disabilities who require assistance in caring for themselves. The statute authorizes the Department of Labor to define the term “companionship services.” The Final Rule defines “companionship services” as the provision of fellowship and protection and explains that “companionship services” may also include the provision of care if the care is provided attendant to and in conjunction with the provision of fellowship and protection and does not exceed 20 percent of the total hours worked per person and per workweek.”
Q. “What are the requirements for the exclusion of sleep time from hours worked during shifts of 24 hours or more?
“Sleep time may be properly excluded from compensable hours worked for an employee on duty for 24 hours or more if (1) adequate sleeping facilities are furnished by the employer, (2) the employee’s time spent sleeping is usually uninterrupted, and (3) there is an expressed or implied agreement to exclude sleep time.”
Home Owners Insurance / Umbrella Policy Add-on
Some clients tell us that their insurance agents recommend purchasing an add-on to their homeowners insurance called an “Umbrella Policy” to help protect them against liabilities that occur in or on the property. Policies of $1,000,000 extra coverage can be had for as little as $300 per year, and we are told bring great peace of mind. Check with your insurance agent to see if this is an option for your situation.
Workman’s Compensation Insurance
In 23 states workers comp insurance is required for W2 domestic employees. Those states are: Alaska, California, Colorado, Connecticut, Delaware, District of Columbia, Hawaii, Iowa, Illinois, Kansas, Kentucky, Maryland, Massachusetts, Michigan, Minnesota, New Hampshire, New Jersey, New York, Ohio, Oklahoma, South Dakota. Utah, and Washington.
You can obtain workers comp in most states through a HomePay partner, your homeowner’s insurance, or your insurance agent. The cost varies from state to state , but the average is $200 per month. Click on the below link to visit your states website that addresses workmans comp. http://www.dol.gov/owcp/dfec/regs/compliance/wc.htm
Tax Deductions for Live-in Care
Private home care As a Medical Expense
You can include in medical expenses amounts paid for qualified long-term care services and premiums paid for qualified long-term care insurance contracts.
Qualified Long-Term Care Services
Qualified long-term care services are necessary diagnostic, preventive, therapeutic, curing, treating, mitigating, rehabilitative services, and maintenance and personal care services (defined later) that are:
• Required by a chronically ill individual, and
• Provided pursuant to a plan of care prescribed by a licensed health care practitioner.
Tax Deductions for Live-in Care (cont.)
Chronically ill individual: An individual is chronically ill if, within the previous 12 months, a licensed health care practitioner has certified that the individual meets either of the following descriptions. • He or she is unable to perform at least two activities of daily living without substantial assistance from another individual for at least 90 days, due to a loss of functional capacity. Activities of daily living are eating, toileting, transferring, bathing, dressing, and continence. • He or she requires substantial supervision to be protected from threats to health and safety due to severe cognitive impairment. Maintenance and personal care services. Maintenance or personal care services is care which has as its primary purpose the providing of a chronically ill individual with needed assistance with his or her disabilities (including protection from threats to health and safety due to severe cognitive impairment).
Nursing Services
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.
Nursing Services
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. However, certain maintenance or personal care services provided for qualified long-term care can be included in medical expenses. Additionally, certain expenses for household services or for the care of a qualifying individual incurred to allow you to work may qualify for the child and dependent care credit. See Publication 503, Child and Dependent Care Expenses.
You can also include in medical expenses part of the amount you pay for that attendant’s meals. Divide the food expense among the household members to find the cost of the attendant’s food. Then divide that cost in the same manner as in the preceding paragraph. If you had to pay additional amounts for household upkeep because of the attendant, you can include the extra amounts with your medical expenses. This includes extra rent or utilities you pay because you moved to a larger apartment to provide space for the attendant.
Employment taxes
You can include as a medical expense social security tax, FUTA, Medicare tax, and state employment taxes you pay for an attendant who provides medical care. If the attendant also provides personal and household services, you can include as a medical expense only the amount of employment taxes paid for medical services as explained earlier. For information on employment tax responsibilities of household employers, see Publication 926, Household Employer’s Tax Guide. For more information on tax deductible Medical Expenses directly from the IRS go to: http://www.irs.gov/publications/p502/ar02.html#en _US_pu blink1000178974
Private home care As a Dependent Care Expense
To qualify for a dependency deduction, you must pay for more than 50% of your qualifying family member or relative’s support costs. They only qualifies as a dependent if he or she meets the gross income and the joint return test. If they doesn’t qualify as a dependent because of these tests, you cannot claim a dependency deduction, but you can still claim his or her medical expenses. The current dependent care tax deduction $3,000 for one dependent, $6000 for two dependents. The care provider must be legal, have a valid social security or tax ID and provide you with invoices. If a group of people are sharing costs for a qualifying relative, a multiple support declaration (IRS Form 2120) can be filed to grant one family member the exemption. Important to point out, is that to claim the above tax deduction you need to pay the caregiver “on the books” and have both their legal invoices, the care providers social security or tax ID number and receipt of payment.
Learn all the details at the IRS direct at: http://www.irs.gov/publications/p503/ar02.html#en_US_publink1000203328
Learn all the details at the IRS direct at: http://www.irs.gov/publications/p503/ar02.html#en_US_publink1000203328
LEGAL DISCLAIMER: The information contained in this guide are provided to you “AS IS”, and do not constitute legal or tax advice. We make no claims, promises or guarantees about the accuracy, completeness, or adequacy of the information contained in or linked to this guide. Use the information provided within this guide at your own risk.
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