Claimant - FICA Question

[ltcadviser]

Ok, I have a claimant with Genworth. He hired an independent home health aide. He must classify the home health aide as a "Household Employee" under the Internal Revenue Code, because he controls the time and duties of the employee thus he must pay 7.65% for FICA.

Genworth is only reimbursing him for hourly wages x # of hours worked, not for my client's out-of-pocket FICA expenses to cover the taxes for the home health aide. However, if my client went through an agency, the home care agency would be paying the employee's FICA and Medicare taxes and it would be rolled into the fee my client would be paying and he would be reimbursed 100%.

Has anyone dealt with this before?

My client is a stickler for details and honesty and he will not roll the taxes into the hourly rate on the invoices submitted to Genworth.

 

[Arthur Rudnick]

Jack,
Not sure what the issue is. Your client should have just paid direct and issued a 1099. Let the povider worry about taxes, FICA & SS. I don't believe an IRS classification would be necessary.

Neither Genworth nor any company will reimburse for anything other than hours worked, up to the reimbursement amount.

 

[ltcadviser]

Jack,
Not sure what the issue is. Your client should have just paid direct and issued a 1099. Let the povider worry about taxes, FICA & SS.

Like I said, he is a stickler for details and honesty. The home health aide meets the definition of Household Employee not independent contractor under the code. He is insisting upon paying the taxes.

 

[billberry12]

"He is insisting upon paying the taxes."

Well, it pretty simple. If he pays the taxes, Genworth won't reimburse him for them. If he 1009's they will. Nothing is going to change that fact. He needs to make a decision doesn't he?

By the way, doesn't this type client bug you a little.

 

[ltcadviser]

"He is insisting upon paying the taxes."

Well, it pretty simple. If he pays the taxes, Genworth won't reimburse him for them. If he 1009's they will. Nothing is going to change that fact. He needs to make a decision doesn't he?

By the way, doesn't this type client bug you a little.

He doesn't bug me, whatsoever. I actually see his point, and I sympathize with him. He is a financial planner; he fell 18 feet down a well and now has no movement in his legs. His CPA says the aide is a Household Employee under the code.

 

[Arthur Rudnick]

previously posted by ltcadviser

His CPA says the aide is a Household Employee under the code.

Jack,
The IRS code has nothing to do with an individual who works and receives a 1099. You're an insurance agent, you recieve a 1099. Where on your tax forms does it ask for your "IRS Designated Occupation"? It doesn't.

As previously stated, Genworth will only reimburse for hours worked.

If a full-time, W-2 worker takes a part-time job on the weekends and is working independently, it's not unusal for him to receive a 1099 for his work. There is no reason for your client to have to worry about paying his provider's taxes, SS, FICA, Workman's Comp, etc. as long as he issues a 1099.

You're making this way too complicated.

 

[billberry12]

Actually I don't think Jack is making it complicated, but his client certainly is.

 

[Arthur Rudnick]

previous posted by billberry12

Actually I don't think Jack is making it complicated, but his client certainly is.

And the guy is listening to his CPA?

Jack,
Bottom line is, if this guy wants to issue a W-2 and pay all of his aide's taxes, let him go ahead. As long as he understands that the costs will be his alone and Genworth will not reimburse a cent above the hourly rate.

If he's OK with that, end of story.

 

[VolAgent]

Actually I don't think Jack is making it complicated, but his client certainly is.

How, he is merely complying with the law as determined by his CPA.

http://www.irs.gov/pub/irs-pdf/p926.pdf

It seems the FICA tax would be a reasonable expense? I presume he is getting this guy for less than the going rate?

 

[Arthur Rudnick]

Previously posted by VolAgent

Actually I don't think Jack is making it complicated, but his client certainly is.

How, he is merely complying with the law as determined by his CPA.

However, also in the IRS Bulletin is:

You do not need to withhold federal income tax from your household employee's wages. But if your employee asks you to withhold it, you can.