I have a Personal Care Agreement with my parents where they pay us to care for them in our home. This amount is much less than an assisted living facility and we know they are getting the personal attention and care they need. I have been trying to find information on what expenses we need to keep record of that we can deduct was expenses to offset part of the money we received. Please let me know if anyone knows a good accountant who has experience with Personal Care Agreements.
My wife does not work outside of the home and is available to be with them throughout the day. We agreed in the PCA that we are independent contractors. My parents use their own money for clothing, insurance, medications, doctors and taxes. I would think I could take many of the same expense deductions as a home based business could take when determining how much of the money my parents pay me is taxable. Since we are just starting with this I wanted to make sure I keep records that I can use at the end of the year when doing my taxes. The recommendation to consult with someone like HR Block is good advice and will try that in a couple weeks after the tax deadline. I would not think I would need to be taxed an the full amount I receive to care for my parents but rather the amount I receive above my expenses in providing the care, similar to the profit a business shows after their expenses have been deducted from their income. Does that make sense?
I’m guessing it has some sort of “reasonable rates” verbiage in the PCA. & it’s not specifically spelled out.
If so, you can set up what works for you..... & I’d talk with whomever currently does your taxes as to how to set this up like in May (after tax season) as to whether to buy Quickbooks or let a CPA do it or perhaps go with the H&R Block open all year business branches (these are a different creature than the tax season offices). Wait till tax season is over. It’s your first year, that will be your story if there’s drama from state or irs on not filing quarterly first year.
But you can start mulling things over now..... like if you work full time, you cannot reasonably bill 40 hrs a week of care, but if your spouse doesn’t work they perhaps could be the caregiver. Whatever the case, there’s FICA reporting to do for wages paid for TY 2018 for irs and your state. If you are yourself drawing SS then you’ve got to keep “care” wages under whatever SSA has as the limit for how your getting paid by SS. (As an aside on this, I had a part time contract labor worker who was getting age 62 SSA and she would not work after she was close to the 12-14k income max as it would penalize her SS.) If you want to lower your personal tax exposure then perhaps do less or no “care” and do instead a rental agreement. Rent does have its own issues, like maybe need to get registered with your city. Rent has its specific tax filings so your current tax person can suggest what system to use. If your think rent is going to be part of this, then figure out their living area is what sq footage and research as to what the comparable rents are for your zip code.
Just start getting your data together for meeting with your old tax person in May. If you don’t have one, I’d suggest you call a Block small biz office to get a consultation. I’ve used them for my biz & LLCs & what I’ve found is most are / were enrolled agents for IRS or other tax pro. My current at Block did forensic accounting at a law firm before Block, she’s hysterically funny. Blocks rates are set & they will do the quarterly filings if it seems you have to go that route. For quarterly filing situations, I personally would not ever try to do it on my own even with Quickbooks, TurboTax.
If you can kinda wait to start any payment till May, do that.
Good luck & get organized.
In response to JoAnn29, I realize this is a caregiver forum. I am a caregiver and posted this question under Financial Matters in hope that other caregivers have had the same questions that I have.
- did they issue you (before the end of this January, 2018) a W-2 for 2017?
- and they actually pay FICA and any other taxes due in 2017?
- how did PCA differentiate payment for care vs rent/room & board?
Was PCA done by an elder law firm or did you all do this as a DIY?
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You may need the help of a CPA. Check your phonebook or internet for those in your area.