Paying it Forward Part 2: Dodging Disaster

Many of us have grown up watching James Bond films, and despite everything else they contain, one of the biggest draws that keep us coming back are the action sequences. We sit in fascination as 007 swerves his car around oncoming traffic, or ducks to avoid overhead obstacles – always narrowly missing tragedy by a hair’s breadth. We could never picture ourselves in such circumstances, dodging disasters, so we enjoy the show. But the reality for many families facing the issue of continuing care for elderly loved ones is that they very well might find themselves facing a HUGE problem, without knowing it until it is too late. Once again, as with the previous article, YOU – the healthcare provider – can help them, and probably gain a new, trusted client in the process…

It seems innocent enough: Mom or dad is older now, and they suffer a fall, heart attack, or stroke that leaves them in need of some measure of long-term care. They wish to remain at home, and it just so happens that a trustworthy family friend is a CNA who offers to care for them at the house in return for whatever payment the family thinks is fair. Rather than call an agency, the family decides to privately pay the friend person-to-person. They go so far as to draw up a “sub-contractor agreement” that identifies the friend as an “independent agent”, responsible for all of their own insurances and taxes and waiving all liability should they be injured in caring for mom or dad. Everyone is happy. What could be better?

The problem comes at tax time. The IRS defines individuals such as home health aides, not as ‘contractors’ but as ‘household employees’, and the homeowner as the ‘employer.’ There are a number of criteria by which they do this, but the essential logic is that if a person comes to your premises,  performs work that you have outlined for them, uses supplies that you provide, and makes more than $1,800.00 per year doing it (as of 2013), they are considered – in the eyes of the IRS – to be the ‘employee’ of the premises owner. This means that the homeowner is required to register for a tax ID (EIN), and withhold things like State tax, Unemployment, MediCare, Workman’s Comp, and Social Security. Failing to do so can result in an audit, heavy fines, and may (depending upon the circumstances) be considered tax evasion / tax fraud. And we all know that never ends well…

All of this information is all clearly presented by the IRS to help define and clarify matters in a much more comprehensive way than we can with this article. Nevertheless, the long and short of it is that by doing something that seems to be good and beneficial, a well meaning family could put themselves on a collision course with disaster; without even knowing it. But as someone “in the know,” YOU can not only help them avoid this problem before it arises, but build a bridge toward creating a client at the same time. How?

Home healthcare agencies – people that hire aides using the employer/employee model – handle all of the tax issues without the client being involved. They stand as the “middle man” who actually employs the aides, and therefore alleviate these problems for the already beleaguered family. If you are involved with long term healthcare, you likely have respected and reputable contacts with such agencies and can help steer a family looking for in-home care in the best direction. When they realize the “close call” that you saved them from, they will be more likely to return to you for further advice, and – when the time comes – further assistance with more advanced care. Certainly being able to show them a customized, fully interactive Virtual Tour of your facility would ‘seal the deal’ after all you have done to help them avoid a major financial catastrophe…

It must be stressed that this article in no way serves as tax advice, nor should be used to determine an answer to a question best left to an attorney, tax advisor, or accountant. The points mentioned here have been general, and made merely to shed light on a large issue that many are not familiar with until it is too late. Clearly, consulting proper professional expertise to determine state-by-state variations on these things would be the logical step. Nevertheless, it all comes down to the same thing: You are helping people dodge an issue that could severely impact them by pointing them in the right direction. When you gain their trust? You will have an “agent” on your side who will turn to you, as well as consider it their “mission” to recommend you to everyone they know. That’s a pretty nice “Bond” to create, when you think about it…