Claimant - FICA Question

[VolAgent]

Previously posted by VolAgent

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


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.

That is great, if we were talking about income tax. But we are talking about FICA, which he is responsible for withholding. Also, he isn't so much concerned about the employee's portion which comes from the employee's paycheck, but the portion of FICA that he is responsible for as the employer.

 

[Arthur Rudnick]

previously posted by VolAgent

That is great, if we were talking about income tax. But we are talking about FICA, which he is responsible for withholding. Also, he isn't so much concerned about the employee's portion which comes from the employee's paycheck, but the portion of FICA that he is responsible for as the employer.

Well, either way.........
The guy issues a 1099 and the aide pays his/her own taxes, FICA, etc., or he issues a W-2 and Jack's client is fully responsible for the costs.

As long as Jack fully explains those 2 options, it's up to the client to do as he pleases. If he wants to listen to his CPA, that's no ones concern.

 

[VolAgent]

previously posted by VolAgent




Well, either way.........
The guy issues a 1099 and the aide pays his/her own taxes, FICA, etc., or he issues a W-2 and Jack's client is fully responsible for the costs.

As long as Jack fully explains those 2 options, it's up to the client to do as he pleases. If he wants to listen to his CPA, that's no ones concern.

One option is a violation and the other is compliant with Federal Tax Law. Just ask Zoe Baird what happens when you don't pay the nanny tax.

 

[Arthur Rudnick]

previously posted by VolAgent

One option is a violation and the other is compliant with Federal Tax Law. Just ask Zoe Baird what happens when you don't pay the nanny tax.

as long as the taxes are paid by someone, and proper forms are submitted, it's not an issue.

 

[VolAgent]

previously posted by VolAgent



as long as the taxes are paid by someone, and proper forms are submitted, it's not an issue.

That is beyond incorrect.

 

[Arthur Rudnick]

previously posted by VolAgent

That is beyond incorrect.

correct or incorrect, it's Jack's client's problem.
If there's doubt, let him follow the advice of his CPA

 

[TwiLight]

The simple answer is to use a licensed agency and not an individual.

The fact that the Genworth allows a non licensed individual is now the clients responsibility.

I have owned a payroll company for 23 years and assure you that the client should be concerned.

There are tests to determine if this is a Household employee as defined by the IRS.

1. does this individual hold themselves out as a business and have other clients?
2. direction and control.
3. licensing

if they fail 2 of the 3 above then the client will be responsible for FICA/MED (both sides if not withheld from the payments).

Licensing, bonding and insured is a big deal in this arena and should be the number one concern of the client.

If the Client is not willing to concern themselves with this basic precaution than so be it, use the old "you should follow the advice of your CPA or Tax Adviser". IMHO

 

[ltcadviser]

previously posted by ltcadviser



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.

Well, today the claims benefits analyst from Genworth called me. Seems like the 2 reps I spoke with in the Genworth claims department gave me incorrect information.

Genworth will reimburse FICA to a claimant. A Schedule H needs to be submitted. Now, if taxes are done annually and the Schedule H is submitted once per year, then the entire monthly reimbursement benefit is likely to be eaten up by taxes. The most cost effective way for the claimant is to try to submit the Schedule H on a quarterly or monthly basis, if possible. I need to call my client's CPA to review with her if this can be done.