Financial Facts About Caregivers Who Work in Your Home (continued)

Federal Unemployment Insurance: If you paid your employee $1,000 or more in one calendar quarter in 2007, you must pay a Federal Unemployment Tax (FUTA) on these wages with your annual Schedule H of your 1040 Form. The 2007 rate is 6.2% of the first $7,000 in wages. You can take a 5.4% credit against this tax if you paid your full State Unemployment Insurance (SUI) payments before the filing due date for the 1040 Form.

Exceptions: Wages paid to employees who are under 18 years old and who are not full-time household employees (such as a student) are exempt from Social Security and Medicare taxes. There are also some complicated exceptions to the rules if the in-home caregiver is a relative (spouse, child or grandparent). For more information about relative caregivers, Social Security, Medicare or FUTA, contact the IRS, 800-829-1040, www.irs.gov or the local IRS office: 1301 Clay Street, Suite 160, Oakland, CA 94612, 510-637-2487 (electronic assistance only.)

Federal Immigration Status: You are required to complete an Employee Eligibility Verification Form (I-9) to keep on file for the federal government. This form establishes that the employee is eligible to work in the United States. To receive this form, contact U.S. Citizenship and Immigration Services at www.uscis.gov.

What Are My State Requirements?

You are not required to withhold state income taxes from the wages of a caregiver who works in your home. But if you pay him/her $750 or more in a calendar quarter, you are supposed to withhold a certain percentage of the employee’s salary for State Disability Insurance (SDI). The SDI withholding rate for 2007 is 0.6%.

If you pay your caregiver more than $1000 in any calendar quarter, you must also pay into Unemployment Insurance (SUI) at a rate of approximately 3.4% on the first $7,000 of wages. An additional 0.1% Employment Training Tax (ETT) is paid at the same time. Both the employee’s contribution to SDI and your contributions to SUI and ETT are paid to the state either quarterly or annually if wages are $20,000 or less. For more information on State Disability, Unemployment Insurance or the Training Tax, or to order an employer “registration packet,” contact the Employment Development Department (EDD) at 888-745-3886 or visit the department’s website, www.edd.ca.gov. See the EDD’s Household Employer’s Guide (DE 8829) form for details.

Additional State Requirements: You must report your new employee to the Employment Development Department, P.O. Box 997016, MIC 96, West Sacramento, CA 95799 (fax: 916-319-4400) within 20 days of start of work. You can download the DE-34 reporting form at www.edd.ca.gov or request one at 916-255-1743.

A Workers’ Compensation Policy is required to cover any in-home caregiver. If you have a homeowner’s policy, occasional sitters who work in your home are usually covered, but a full-time caregiver may require extra coverage. Some, but not all, renters’ policies cover household employees or can be written to do so. Check with your insurance agent about the coverage of your particular policy. If you’re not covered through your existing insurance, you need to buy a policy. The State Compensation Insurance Fund usually offers the least expensive policy for a single employee. For more information, contact the Fund at 877-405-4545, or go to their website, www.scif.com.