A Guide to Caregiver Registries and Taxes

Are you new to working with a caregiver registry and worried about taxes or looking for a refresher? 

In this article, we’ll talk about:

• What you need to know
• Actions you need to take
• Systems you can incorporate to make taxes easier

What you need to know about caregiver registries and taxes

For caregivers who qualify as independent contractors (like those who find work through your registry), they are responsible for: 

1. Reporting the income they make from work you matched them with.
2. Paying the appropriate taxes on that income.

For W2 employees, the employer would be responsible for withholding their income tax, social security, and Medicare contributions. As a caregiver registry, utilizing 1099 workers makes it easier for you to manage taxes (because you don’t have to do it). 

Actions you need to take

Although your tax liability is much more limited than that of a home care agency, there are a few things you need to have in place. 

1. Request your caregivers’ W9 information and keep those on hand. 
2. Disperse payment as the caregivers negotiate their own schedules and rates with their clients. 
3. Complete the form 1099-NEC form (for non-employee compensation) or if you utilize a third-party payment processing system (like Ally), they can issue 1099-K forms on your behalf.

READ MORE: How To Get Involved in Your Community to Improve Caregiving Legislation

Most importantly, don’t intervene or supervise caregivers on how to manage their taxes or claiming their income, etc… You’re only responsible for the match and gathering their essential documents. Nothing more, nothing less. 

Understand the potential risks of misclassification.

As long as you keep your document trail clean and use best practices for a caregiver registry, you are not putting caregivers at-risk. However, it is important to understand the boundaries and rules set forth for independent contractors versus employees—and what the implications are. 

In brief, the Final Independent Contractor Rule outlines factors that identify independent contractors versus employees:

1. Opportunity for profit or loss based on skill.
2. Investments by the worker.
3. Degree of permanence of the working relationship.
4. Nature and degree of control.
5. The extent of the work being integral to the business’ success.
6. Worker skill and initiative.

For more details, read our full blog: The Independent Contractor Rule: What You Need To Know.

Now that we’ve got that out of the way, here are a few reasons why it’s important to correctly classify caregivers seeking work through your registry:

1. Home care (as an industry) has commonly misclassified caregivers as independent contractors when they were, in fact, employees. Since 2022, healthcare facilities have been under more scrutiny with investigations and audits. More than $15 Million in back wages have been recovered from the DOL, just in the Southeast region alone, McKnight’s reported. 
2. Back wages aren’t the only form of legal ramifications either for caregiver registries. This could also include wage and hour violations, tax issues, and other labor law violations.
3. Violations, fines, and other implications of misclassification create challenges for you to find new business with families, generate relationships with referral sources, and more. 

Here is one real-life case study as shared with us by Polsinelli. 

Case: Walsh V. Med Staffing of America

What happened: A Virginia-based nurse registry was ordered to pay $7.2M in back wages and liquidated damages to nurses that found work through their registry because of misclassification. They also failed to mention certain information that would’ve helped their legal counsel provide accurate advice, which negated their ability to make a good-faith defense. 

Why: The misclassification was defended by the fact that this registry had poor documentation practices. The documentation failed to support their business model. 

Find this case and more information in our ebook: Breaking Down the Different Methods of Home Care Delivery: Agencies, Registries, Virtual Marketplaces and Consumer-Directed Models

Defend your business model with Ally.

Taxes are an important consideration for the individuals who find work through your registry. On the other hand, the most important piece to you, should be adhering to best practices that defend and support your business model. 

Julie Black, Owner of Nurture Care, learned this first-hand when her registry in Florida underwent an audit with the DOL. They were in and out within 2 weeks because of Ally’s payment partition and other business-supporting features. 

If you’re ready to switch to a registry management software that can adequately support your business with the right documentation requirements, look no further than Ally.