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Posted June 16, 2006

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Taxes: Filing for In-Home Professional Caregiving Services

Q. My family recently hired a nice couple with the referral of an agency to come in and take care of my father, who is unable to do many things for himself. We will be signing a contract with the couple and issuing a 1099 tax form to them at the end of the year. Who do I contact to determine what needs to be done to issue a 1099 to these people, and how do I find out whether there are some sort of tax benefits for my father?

Kim R., Benicia, California.

A. First, because the people your family is hiring are not actually coming through an agency and it appears you will be paying them directly, make certain that they are not really your “employees,” rather than independent contractors. Hopefully, the contract will make that clear.

Depending on the nature of the services, some or all of the expense may qualify as medical expenses on your father's income tax return, on Schedule A. For additional information on both of these issues you can look for IRS Publication 926 (Household Employer's Tax Guide), and Publication 502, (Medical and Dental Expenses). These are available at your local IRS office or online at the IRS website.

Also, there are many types of Form 1099s. Your father will need to issue a Form 1099-MISC, which is the one used for services. You will also need a Form 1096, which acts as a transmittal form to the IRS. Although you can get the instructions on line at the IRS website, you will need to get the actual forms from your local IRS office, or perhaps a local accounting firm can give you some. Make certain all the information needed to complete the forms is obtained on hiring -- full names, addresses and Social Security numbers.

This answer has been provided by Carol I. Katz, MS, CPA/PFS, CFP, CVA, the Deputy Tax Director at Leonard J. Miller & Associates, Chartered, in Baltimore, Maryland . Carol Katz works exclusively in the tax and financial planning areas, has been published in professional journals and has discussed tax issues on television and public radio. She can be reached at carolkatz@lenmiller.com.

 

 

 

 

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