<p>There is potentially a significant amount of money at stake; would definitely use a elder care attorney to help you navigate this carefully, so you understand your options and what will best work for you and your mom. </p>
<p>Have read sad things about folks who have reverse mortgages but are forced to sell because they can no longer live in their homes–much better to sell on your terms and timeline than the reverse mortgage holder’s.</p>
<p>An example of one summary for NY State <a href=“http://www.dfs.ny.gov/consumer/reversemortgage.htm”>http://www.dfs.ny.gov/consumer/reversemortgage.htm</a><br>
That’s only a start- there’s more on th NY laws and NYTimes and others have the usual scare stories. </p>
<p>Thank you all, I certainly would have made many mistakes without you. I googled “elder care employee or independent contractor” and read a great deal that there is no doubt but that the caregiver is an employee. The agency rep sent me his contract which calls the caregiver an independent contractor. I sent him a long email how this is clearly wrong that that I will need to consult an elder care lawyer about a vast many things. Workmans comp, totally essential, is only a minuscule part of this big picture. Then the home refinance is an enormous undertaking. My own little family has no money; this will all have to come out of my mother’s IRA, and I will have to speak to her this evening and the lawyer tomorrow…</p>
<p>Dharmawheel, if the $60k is in a regular (not Roth) IRA, she will have to pay income taxes on it as it is withdrawn.</p>
<p>It is definitely important to consider the reviews of agencies that provide in-home care and speak with hospital discharge staff. They have a handle on good (and not so good) ones and may be willing to guide you on this. It is common but illegal and dangerous to YOU as employer to accept someone as a caregiver if there aren’t the appropriate protections of work comp, withholdings and all of that in place.</p>
<p>Agree that if the $60K is a regular IRA, it will be taxed as ordinary income as it is withdrawn. Fortunately, given your mom’s age, there will be no early withdrawal penalty. It’s great that she has the home with its equity as an asset, which will give her more options. </p>
<p>Good luck–this is tough territory, as you’re finding.</p>
<p>I think they will be W-2 employees, and not 1099 contractors: you’re setting hours, providing work location and materials, and paying them on a time basis. Having done this (painfully) for years, my strong suggestion is to get a payroll service that handles domestic employees, and have them handle the paperwork and state/federal filings. This does mean that workers don’t get paid until a few days after the end of the payroll period, but the grief you save will be worth it. You’ll need to budget to pay the employer’s share of SS and Medicare, and whatever your state charges for unemployment, and anything else mandated by the state. You also have to keep detailed payroll records at least week-by-week, because if one of your workers files for unemployment you can be asked to state the earnings week-by-week over a specific range of weeks. When my MIL passed away, all her workers quite reasonably applied for unemployment, and the paperwork was pretty tedious.</p>
<p>Your mom will also need a federal Employment Identification Number (EIN), and probably a state one as well. These are needed for filings.</p>
<p>$60K will go very quickly if she needs round-the-clock care. It ran my MIL about $120K/year for that. </p>
<p>MIL had a reverse mortgage, and it was incredibly expensive and a very bad arrangement. I hope you can avoid it. </p>
<p>I wouldn’t worry a whole lot about the taxes on the IRA withdrawals – the medical expense deduction should go up tremendously if her physician certifies her as a chronically ill individual. That also lets you include costs like incontinence supplies in the medical deduction.</p>
<p>Given what arabrab says, it doesn’t sound like she can afford to stay in her house. $120K per year for round the clock care, PLUS the upkeep of the house and the taxes, means her money is going to run out soon.</p>
<p>Wise old mom and HImom, I will call my Mom’s bank tomorrow am and ask if it is a Roth or not . She complains about “having to take distribution” every year if that has any bearing/makes sense. But I will find out tomorrow. I just talked to mom ten seconds ago. But first,must report I had a long talk with the Administrator of a BIG RENOWN caregiver agency whom I didn’t choose, but by whom I was very impressed. They are in 50 states and this branch was in Yonkers. The director remembered me and was kind enough to listen and give me advice at 6:30 pm.He had no issue when I confided that I had basicallly contracted another agency (because of the Polish-American connection) but wanted his advice. I learned he, too, (and presumably his agencies in 50 states) sends out women as “independent contractors” and he talked at length about how this is a grey area being studied by Congress,Obamacare, states individually about the employee vs. independent contractor legality issues. I asked him, what can I gain from consulting an elder care lawyer? He said, do it. And the lawyer in my judgment can draw up all you need to hire your caregivers as independent contractors,but by all means,asa professional, he/she will satisfy your needs completelyand make sure that if you stipulate “independent contracctor”,your caregiver will be just that. However, I amwilling to take on the res;ponsibilitiesof Employer/employee if that is what the lawyer advises. Well, as it happens,whey my late father became very ill, my mother contacted an elder care lawyer who protected all their assets and got him on Medicaid. I will call this lawyer tomorrow–I went over all of this with my poor old mother over the phone who agreed and agreed to whatever it cost. Oh yes, interesting: the man who advised me from the “big” agency said some of his clients care nothing about workman’s comp…others believe their insurance liability will cover any issues. But OTHERS–andI will be among them–pay $45 a year for workman’s comp. Sorry for the long rambling post, interupted by irritable children, husband, phone calls from deaf mother, and a mom friend very blue with a diffficult child off to college crisis! </p>
<p>ararab,thank you for your intelligent and thorough post,truly a gift. I will study it carefully tomorrow…too much tonight.</p>
<p>Cardinal Fang, my daughter and I figured the 60 k would give her about 14 mo. The representative from the “50 States/Big Agency” said she could save her house and go into a nursing home, or stay in her house and take a reverse mortgage. He said most of his customers chose to take a reverse mortgage and lose everything so as to stay at home rather than go into a nursing home. She would choose that.</p>
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<p>You were talking about hiring two fulltime aides, at $170/day. That comes to 170 * 5 * 2 * 52 = $88400/year just for the employees. Then there are taxes, insurance and maintenance for the house, health expenses not covered by Medicare, Medigap if she has it, and food and supplies.</p>
<p>Agree that there are companies like Atres in Hawaii & probably others in othera areas who will do payroll and HR for you at a fee of about 10% or so of the payroll, including doing the paperwork, withholding, worker’s comp. That is definitely an option to consider and how I was reimbursed when our non-profit was operating as a program under a fiscal agent. It worked OK for us and for the non-profit who paid Altres to have us as Altres employees.</p>
<p>I’m glad you’re working with an elder care attorney so you can have a better understanding of your options and can make informed choices, laying them out as clearly as possible to your mom. This is something that most of us will have to face, sooner or later. It is NOT easy navigating this.</p>
<p>We did contract with a company in SF who handled everything and we specified how many hours and how many times a weeks we wanted help. They arranged for everything and we were to pay them by the hour at the rate quoted by the agency. My SisIL died the day the first worker was in her home the first day, so they gave us a refund for the amount we had pre-paid beyond the day that was worked and one or two other days, to reimburse the workers who had set aside time to come in for those dates.</p>
<p>It was a great peace of mind knowing that the agency was covering all the withholding, worker’s comp, insurance and other issues, out of the funds we paid them. Even tho many agencies consider these workers “independent contractors,” if challenged in court because they are injured and seeking reclassification as employees, I think they would likely win, no matter how many places try to characterize them as “independent contractors.”</p>
<p>Not trying to be one of those nattering nabobs of negativism, but one of my FIL’s home health aides seriously injured her back when positioning him, and I was very glad that there was workman’s comp coverage in place – not only did she require significant medical treatment & lost wages, but she it was determined that she had a permanent injury. The workman’s comp carrier (Allstate; it was a special rider on the homeowner’s policy) took care of all of it. Back injuries are even more likely with home health aides because they are usually working alone – in a facility, if someone needs a lot of help transferring, often two aides, or one aide and some special equipment are involved.</p>
<p>Dharmawheel, nothing to add and we never had to face this particular issue. Just wishing you well, with a reminder to take care of yourself. With everything that’s going on, you’re at risk for caregiver burnout. My favorite word in connection with my mom is: Boundaries!!</p>
<p>Yes, one of the reasons I made sure that all the folks who worked for my nonprofit were classified as employees is just in case they happened to be injured while working for me, I wanted to be sure they were covered. Lost wages and permanent injuries can add up quickly, and if the person is injured, someone will be trying to be sure bills are paid and lost wages are collected.</p>
<p>It is so important to do things correctly. Sadly, back injuries are common when folks are doing a lot of physical work, especially as caregivers age. Paid home health aids may also not have skills sets that translate well to other work if they become disabled from physical work, making their disability more likely to be permanent and total.</p>
<p>This is all so complicated that it does need a lawyer. Anyone link this? <a href=“Independent Contractor Defined | Internal Revenue Service”>http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Independent-Contractor-Defined</a> The link to statutory non-employees includes this:
Companion sitters who are not employees of a companion sitting placement service are generally treated as self-employed for all federal tax purposes.</p>
<p>And, “There is no “magic” or set number of factors that “makes” the worker an employee or an independent contractor, and no one factor stands alone in making this determination. Also, factors which are relevant in one situation may not be relevant in another.
The keys are to look at the entire relationship, consider the degree or extent of the right to direct and control, and finally, to document each of the factors used in coming up with the determination.”</p>
<p>I spun my head going through this when someone wanted to hire me as an independent. And when one of my jobs wanted to covert us. Some of it also depends on the state. In my case, the hire opp was in a state that’s extremely unforgiving of violations.
Best wishes.</p>
<p>Looking ahead, as you state above, the Director of a big company whom I consulted last night told me there is no “magic” to use your word that "makes"an employee an employee or independent contractor. Given the complexity and seriousness of the issues involved, I was surprised by his ease and his peace of mind defining the caregivers he hires out as “independent contractors.” </p>
<p>Cardinal Fang, you are right and we were wrong in our figuring. But don’t forget, my mother gets over $2,000 a month in social security and it quite baffles me how she makes her money go so far. Despite all the drawbacks and alarms and warnings heard here and elsewhere, a reverse mortgage does seem something down the road. The Director whom I referred to said almost all his clients take this road after they spend down their assets in order to stay in their home and not go to a nursing home. </p>
<p>When my late father became ill about 8 yrs ago, my mother was referred by an MD to an elder care lawyer who performed some kind of miracle to protect all my parents’ assets and quickly get my father on medicaid; he died in the nursing home after a long stay in the nursing home. I just consulted her web page and as listed her range of expertise is very wide and she belongs to many professional organizations,serves on Boards, etc. Myy mother gave me the okay to hire and pay her. So I will be calling her in a few minutes. Hope she can see me early next wk.</p>
<p>FYI was able to get a 3 pm appt on Monday w/the elder care lawyer whose secretary was a powerhouse of reassurance that we can go over a host of options. Now to call the bank and find out if the IRA is a Roth or not.</p>
<p>I believe, with required distributions, it is a regular IRA. I agree with others that your mom’s medical expenses will be probably be high enough to offset tax liabilities. But, if you have to take all the 60K out this year + SS you can end up with an income of about 85K for the year. Only medical expenses above 7.5% of that (roughly $6375) can be a deduction. </p>