Determining a Caregiver's Employment Status
Before you can decide whether to issue a 1099, you must correctly classify your caregiver as either a household employee or an independent contractor. The Internal Revenue Service (IRS) bases this distinction primarily on the level of control you have over the worker.
Key factors of control
- Behavioral Control: Do you dictate when and how the caregiver performs their tasks? For example, do you set their schedule, define the specific methods they must follow for bathing or feeding, or provide detailed instructions? If so, they are likely an employee. An independent contractor, by contrast, has more autonomy in performing their services.
- Financial Control: Does the caregiver provide their own tools and supplies, and are they free to work for multiple clients at the same time? Independent contractors often control these aspects of their business. If you provide the equipment and they rely on your income, they are more likely an employee.
- Type of Relationship: Is there a written contract defining a long-term, ongoing relationship? For most in-home care, the nature of the relationship points toward an employer-employee dynamic, not a temporary, project-based contractor relationship.
For most families hiring private, in-home care, the IRS considers the caregiver a household employee, not an independent contractor. Misclassifying an employee as a contractor can lead to significant back taxes, fines, and penalties.
When to Issue a Form W-2 Instead of a 1099
If your caregiver meets the criteria of a household employee, you will need to file a Form W-2 at the end of the year, not a 1099. This applies if you paid them cash wages exceeding the annual threshold set by the IRS. For example, in 2025, if you pay a household employee $2,800 or more in cash wages, you have additional tax responsibilities.
Your responsibilities as a household employer
As a household employer, you are responsible for several tasks, including:
- Obtaining an Employer Identification Number (EIN) from the IRS.
- Withholding Social Security and Medicare taxes (FICA) from your employee's wages. You also have to pay a matching share.
- Paying Federal Unemployment Tax (FUTA) if you paid cash wages of $1,000 or more in any calendar quarter.
- Preparing and providing a Form W-2 to your employee by January 31 of the following year.
- Filing a Schedule H with your annual Form 1040 tax return.
The Rare Case of the 1099-Eligible Caregiver
It is uncommon for a private caregiver to be correctly classified as an independent contractor. This classification would generally apply only if the caregiver operates their own established business, provides their own equipment, sets their own hours, offers services to the general public, and controls the how and when of their work. For instance, a licensed physical therapist or an independent massage therapist who is paid on a per-session basis and operates their own business might be a candidate for a 1099. Even in this situation, you would only issue a 1099-NEC if you paid them $600 or more in a calendar year.
When a 1099-NEC might be appropriate
- The caregiver is an independent business entity, such as an LLC, and provides specialized services.
- The caregiver works for multiple families and controls their own schedule and workload.
- You pay a formal agency, and they, in turn, pay the caregiver. The agency handles the tax paperwork, and you would not issue a 1099 to the individual.
Comparison of Caregiver Classifications
| Feature | Household Employee | Independent Contractor (Rare) |
|---|---|---|
| Hiring Method | Hired directly by a family. | Typically hired for specific services, operates their own business. |
| Level of Control | Family dictates work details: schedule, tasks, methods. | Caregiver has full control over how they work, hours, and resources. |
| Tax Form | W-2 is required if annual cash wages meet IRS threshold. | 1099-NEC is issued only if paid $600+ and classified as a legitimate business. |
| Taxes Paid By | Employer pays FICA taxes (matching employee's share) and FUTA. | Caregiver is responsible for all self-employment taxes. |
| Benefit Eligibility | May be eligible for unemployment insurance benefits. | Ineligible for unemployment benefits; no employer-sponsored benefits. |
| Paperwork Burden | Significant for the employer (EIN, Schedule H, W-2s). | Minimal for the payer, who may only need to file a 1099-NEC. |
| Risk of Misclassification | High penalties for treating as a contractor. | Low risk if the classification is genuinely accurate. |
Potential Tax Credits and Deductions
Properly reporting your caregiver's wages can unlock potential tax benefits for you. For example, if you hire a caregiver for your child or a qualifying adult dependent, you may be eligible for the Child and Dependent Care Credit. Additionally, some wages may qualify as deductible medical expenses if the care is for medical reasons. However, the same expenses cannot be used for both a credit and a deduction. For more detailed information on household employment taxes, consult the official IRS Household Employer's Tax Guide (Publication 926).
Conclusion
For the vast majority of families who hire private, in-home caregivers, the correct procedure is to treat them as a household employee and issue a Form W-2, not a 1099. The IRS considers a caregiver an employee if the hiring family controls the details of their work, which is typical of these arrangements. Misclassification can result in significant tax penalties. By understanding and following the proper IRS guidelines, you can ensure tax compliance and provide your caregiver with the benefits they are entitled to, such as contributions to Social Security and Medicare. If you are ever in doubt, consulting a tax professional is the wisest course of action.
