Tuesday, April 05, 2011

More on FICA and paid family caregivers

On Jan. 28, I covered the issue of FICA taxes for household members who get paid for caregiving, and gave the URL for an IRS publication that gives examples of when it would not have to be paid.

The IRS reference there presumes that the caregiver got paid by an insurance company (as with an LTC policy) or by a state agency. It didn’t talk about what happens if the pay comes from the elder’s savings through POA or a trust. My own tax advisor (HR Block) said that it perfectly legal to treat that as a “gift” and not reportable, at least if the elder is a parent.  That is what I did today with my own filing.

I can imagine “social contract” objections to getting off this way. Normally, wages (even from a family) are subject to normal income and FICA taxes, to the extent that the payee is able to live in an independent manner and pays back rent and has normal freedom.  But in my case (more details will be forthcoming later, maybe even in an e-book), there were real issues for a long time about guaranteeing the availability of other caregivers, because I could not legally leave her (Mother) alone. 

Filial responsibility and filial care is going to be an emerging area of policy and law. Stay tuned. 

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