Per Diem Rates from the U.S. General Services Administration
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Rates are set by fiscal year, effective October 1 each year. Find current rates in the continental United States ("CONUS Rates").
Must Family Caregivers Pay Self-Employment Tax?
Special rules apply to workers who perform in-home services for elderly or disabled individuals (caregivers).
Caregivers are typically classified as employees of the individuals for whom they provide services because they work in the homes of recipients of the services and the recipients have the right to tell the caregivers what needs to be done. These services may or may not be provided by a family member.
If the caregiver employee is a family member, the employer may not owe employment taxes even though the employer needs to report the caregiver's compensation on a Form W-2 (see Publication 926, Household Employer's Tax Guide for more information).
However, in some cases the caregivers are not classified as employees. In such cases, the caregiver must still report the compensation as income on his or her Form 1040, and may be required to pay self-employment tax depending on the facts and circumstances.
The following FAQs illustrate some fact patterns involving family member caregivers who are not employees:
Q 1: Must a taxpayer pay self-employment tax on the income she received from an insurance company to care for her spouse who was injured in an accident and permanently disabled?
The taxpayer is caring for her spouse in their home in an effort to avoid moving him to a nursing facility and also to reduce care giving costs.
The spouse requires assistance with dressing, bathing, eating, etc; the taxpayer also administers medication and helps with basic physical therapy. Taxpayer is neither a trained nurse nor therapist and doesn't provide such services to anyone other than her spouse.
Taxpayer received Form 1099-MISC from the insurance company with the amount paid shown in Box 7 as nonemployee compensation.
A 1: No.
The taxpayer does not owe self-employment tax on amounts reported on the 1099-MISC she received from the insurance company if she is not engaged in a trade or business that provides care giving services, as appears to be the case in this situation.
- The taxpayer must report the full amount of the payment on line 21, Other Income, of Form 1040. In other words, the taxpayer does not file Schedule C or Schedule SE.
Q 2: Must a taxpayer pay self-employment tax on the income received from a state agency to care for his grandchildren so that his daughter can work?
Taxpayer doesn't have a day care business or look after any other children. Taxpayer receives Form 1099-MISC from the state agency with the amount paid shown in Box 7 as nonemployee compensation.
A 2: No.
The taxpayer does not owe self employment tax on amounts reported on the 1099-MISC he received from the state agency if he is not engaged in a trade or business providing day care services, as appears to be the case in this situation.
- The taxpayer must report the full amount of the payment on line 21, Other Income, of Form 1040. As in the above situation, the taxpayer does not file Schedule C or Schedule SE.
Q 3: Must a taxpayer pay self-employment tax on the income received from a state agency to care for her grandmother if the taxpayer operates an adult day-care business as a sole proprietorship for multiple clients, including her grandmother, in her home?
The state agency pays for the care so that the grandmother need not be institutionalized. Taxpayer receives Form 1099-MISC from the state agency with the amount paid shown in Box 7 as nonemployee compensation.
A 3: Yes.
In this case, the taxpayer owes self-employment tax because the taxpayer is engaged in the business of providing care giving services as a sole proprietor operator of an adult day care.
- The taxpayer must report the full amount of the payment as income on bothSchedule C and Schedule SE.