How to Hire a Caregiver Privately: Employer Paperwork

Thirteen dollars an hour. That was the gap between what the agency billed for my father's weekend coverage — $35 — and the $22 his weekday caregiver's cousin quoted me directly, no agency, cash rate, start Saturday.

I said I would think about it over the weekend. It took most of the weekend, because the honest comparison is not between two hourly rates. It is between an invoice and a stack of federal and state filings with my name on every one of them. The stack has a cheerful nickname — the "nanny tax" — that hides what it actually is: the moment you hire a caregiver without an agency in the middle, you become a household employer, with an employer identification number, a W-2 to issue, a tax schedule attached to your own Form 1040, and, depending on your state, an unemployment insurance account and a workers' compensation policy.

None of that is a reason to choose either way. But every document below exists whether or not anyone warns you, so here is the stack, in the order it lands.

The IRS test asks who controls the work, not what you call it

The first idea to let go of is the one everybody reaches for: "she can just be a contractor, we'll do a 1099." IRS Publication 926 (2026), the Household Employer's Tax Guide, decides the question with one sentence: "The worker is your employee if you can control not only what work is done, but how it is done." The flip side is just as plain — only "if only the worker can control how the work is done" is the worker self-employed.

Run the cousin through that test. I would set the hours. The work would happen in my father's house, with his shower chair and his medication list, on a routine I wrote. If Saturday stopped working I would move her to Sunday. Every part of that is control. Publication 926 adds that it does not matter whether the work is full time or part time, or whether you found the worker through an agency-style registry — if the control sits with you, the wages belong on a W-2, and a 1099 in that situation is a misclassification, not a choice.

There are carve-outs worth knowing before any math: wages paid to your spouse, to your child under 21, or — with narrow exceptions — to your own parent do not count for social security and Medicare purposes. So a daughter paying her mother to care for her father is in different territory than a daughter paying the cousin of a caregiver. Different enough that it is worth a session with a tax preparer, not a paragraph here.

Two dollar figures flip the federal switches: $3,000 and $1,000

Federal obligations do not begin with the first hour worked. They begin at thresholds, and both are lower than a month of real caregiving costs.

$3,000 in a year, per employee. Pay any one household employee $3,000 or more in cash wages during 2026 and all of those wages become social security and Medicare wages. The rate is 7.65 percent on each side — 6.2 percent social security plus 1.45 percent Medicare, withheld from the employee and matched by you — on wages up to the 2026 social security wage base of $184,500, with no cap on the Medicare part. At $22 an hour and 30 hours a week, wages are $660 a week. The threshold falls in week five.

$1,000 in a calendar quarter, all employees combined. Cross it in any quarter of 2025 or 2026 and federal unemployment tax (FUTA) attaches to the first $7,000 of each employee's 2026 cash wages. The listed rate is 6 percent, but timely state unemployment contributions earn a credit of up to 5.4 percent, leaving 0.6 percent — a maximum of $42 per employee for the year. At $660 a week, this switch flips in week two.

What the year looks like on those numbers: $34,320 in wages, $2,625.48 withheld from the caregiver's pay, a matching $2,625.48 of employer tax from you, and $42 of FUTA. Call it $2,667 of employer-side federal tax, about $222 a month, before any state program. Income tax withholding, unusually, is voluntary: Publication 926 says you withhold federal income tax "only if your household employee asks you to withhold it and you agree." The employment taxes are not voluntary, and they settle up once a year on Schedule H — which means the money is easy to spend in July and painful to find in April, something the IRS anticipates by suggesting you raise your own withholding or make estimated payments along the way.

The $13-an-hour gap, rerun with these numbers: $20,280 a year in gross savings, minus roughly $2,667 in federal employer taxes, minus state premiums, minus the hours of administration — or a payroll service's monthly fee — that an agency's invoice full of minimums and multipliers was quietly covering. Still a large number. Just not $20,280.

Six pieces of paper, in the order they appear

The filings arrive in a fixed sequence, and two of them come due before or on the first day of work.

1. Form I-9 (USCIS). Publication 926 puts it first: by the first day of work you and the employee complete the Employment Eligibility Verification, and you keep it. Nobody files it anywhere. It waits in a drawer for an inspection that will probably never come, and its absence is a violation all by itself.
2. An EIN. Form W-2 and Schedule H both want an employer identification number, not your SSN. Free, online at IRS.gov/EIN or by Form SS-4, issued in minutes if you apply online.
3. The state new-hire report. Under 42 U.S.C. 653a, every employer reports each new hire to the state's directory — generally within 20 days — so child-support agencies can find wages. Household employers are not exempt, and Publication 926 points you to your state's reporting site.
4. A wage record. Each payday: hours, gross pay, the 7.65 percent withheld, anything else withheld. No prescribed form, but Schedule H and the W-2 are assembled from it, and a wage dispute is settled by whoever kept contemporaneous records.
5. Form W-2, for 2026 wages, due to the employee and to the Social Security Administration by 1 February 2027.
6. Schedule H (Form 1040), the once-a-year reconciliation of social security, Medicare, and FUTA taxes, filed with your 2026 return by 15 April 2027.

Notice whose return that is. Schedule H attaches to the Form 1040 of the employer — and who the employer is, when the checks come from a parent's account under a power of attorney, is exactly the kind of question to put to a tax professional before the first payday rather than after the first W-2. The signing authority itself is a separate document problem: an employment agreement is a financial contract, which is durable-POA territory, not healthcare-proxy territory.

The state registrations that don't wait for April

Everything above runs on the federal calendar, which is forgiving — one big filing in April. States are not on that calendar. Publication 926 says only that you "should contact your state unemployment tax agency" and find out whether you must "carry workers' compensation insurance," and then stops, because there are 50 versions of the answer. Two of them, to show the shape:

California registers household employers fast. Pay $750 or more in cash wages in a calendar quarter and you must register with the Employment Development Department within 15 days (EDD, Household Employer, read 31 August 2026). At $750 a quarter you withhold State Disability Insurance; at $1,000 a quarter you also owe Unemployment Insurance and Employment Training Tax — and once crossed, the obligation runs through the rest of the current year and the entire following calendar year even if wages drop. At $660 a week, the 15-day clock starts in week two.

New York draws its line at hours, not dollars. Under the state workers' compensation law, "domestic workers, or private household workers, employed 40 or more hours per week by the same employer (including live-in help), are required to be covered by a New York State workers' compensation insurance policy" (NYSIF, Domestic Workers, read 31 August 2026). Hours where the employer requires the worker's presence count, which is what makes a live-in arrangement a 40-hour arrangement almost by definition.

Your state will differ from both. The two offices that can say how are the state unemployment tax agency (for registration and quarterly returns) and the state workers' compensation board or fund (for whether a household policy is mandatory, and at how many hours). Ask both before the first shift, because a workers' compensation policy protects you as much as the caregiver — an uninsured injury in your parent's kitchen is a claim against the household, and homeowner's policies routinely exclude employees. Whether yours does is a question for the insurer, in writing.

One more registration exists that families almost never trigger themselves but should recognize: if the caregiver's wages are actually paid by a Medicaid self-directed program, the program's fiscal intermediary typically runs this entire payroll stack for you. That is one of the quieter arguments for getting through a waiver waiting list before hiring privately.

Overtime reads differently when there is no agency in the middle

Agencies cannot claim the federal companionship exemption — that has been the rule of 29 CFR 552.109 since the 2013 home care rule took effect in 2015. A household hiring directly still can. But read 29 CFR 552.6 before assuming it fits, because the 2013 text defines companionship services as "the provision of fellowship and protection," and lets care — dressing, grooming, feeding, bathing, toileting, transferring, meal preparation — ride along only "if it does not exceed 20 percent of the total hours worked per person and per workweek." Medically related services are excluded entirely, judged by whether the task typically requires trained personnel, not by the title of the person doing it.

Be honest about the arithmetic. If you are hiring because your father cannot shower, dress, or cook for himself, the hands-on portion of a 30-hour week is not staying under six hours. Outside the exemption, federal minimum wage and time-and-a-half over 40 hours apply, and states add their own layers — California requires overtime for a personal attendant after nine hours in a day or 45 in a week under Labor Code 1454.

The asterisk on all of it: the Department of Labor proposed rescinding the 2013 rule on 2 July 2025 (RIN 1235-AA51), and a July 2025 field bulletin suspended federal enforcement of the 2013 provisions while that proposal is pending. As of 31 August 2026, a Federal Register search on that RIN returns no final rule — the regulation still reads the way it read, enforcement posture aside, and state wage law never moved at all. If the exemption question matters to your arrangement, that is a wage-and-hour lawyer's question in your state, this year.

The year, laid out on a calendar

For a caregiver starting Saturday, 5 September 2026, at $22 an hour and 30 hours a week:

• By 5 September — Form I-9 completed; EIN applied for; workers' compensation answered in writing for your state.
• Mid-September — state new-hire report filed (20-day federal outer limit); in California-style states, the wage threshold for registration is already crossed.
• Every payday — 7.65 percent withheld, hours and gross recorded.
• Quarterly — state unemployment returns, where registered.
• 1 February 2027 — W-2 to the caregiver and the SSA.
• 15 April 2027 — Schedule H with the 2026 Form 1040, roughly $2,667 of federal employer tax settling at once unless estimated payments spread it out.

I priced all of this at the kitchen table that Sunday and stayed with the agency for weekends — not because the paperwork is unmanageable, but because in our case $13 an hour bought payroll, a substitute when someone called in sick, and an insurance certificate I never had to think about. Another family, with steadier schedules and a payroll service, would reasonably land the other way. The stack of forms is the same stack either way; the only mistake is discovering it in April. Where the money for any of it comes from in the first place is its own map.

Sources

Read on 31 August 2026 unless noted; thresholds below are the 2026 tax-year figures and change annually.

• IRS Publication 926 (2026), Household Employer's Tax Guide — the $3,000 social security and Medicare threshold, the $1,000-per-quarter FUTA trigger and 0.6 percent net rate on the first $7,000, the employee-versus-self-employed control test, family-member wage exceptions, EIN, Form I-9, the 1 February 2027 W-2 deadline, and the optional character of federal income tax withholding are all stated there.
• About Schedule H (Form 1040) and Form SS-4 / online EIN application, IRS; Form I-9, USCIS.
• 29 CFR 552.6 (companionship services, including the 20 percent care limit) and 29 CFR 552.109 (third-party employers) — quotations checked against the official annual-edition XML on govinfo (last amended 78 FR 60557, 1 October 2013); the eCFR lists title 29 as current through 27 August 2026.
• U.S. Department of Labor, proposed rescission of the 2013 home care rule, 2 July 2025, RIN 1235-AA51. A Federal Register API search on that RIN on 31 August 2026 returns no final rule — only 2026 Unified Agenda listings dated 14 August 2026.
• 42 U.S.C. 653a — state directory of new hires; reporting generally within 20 days of hire.
• California EDD, Household Employer — registration within 15 days of paying $750 in a quarter; SDI at $750, UI and ETT at $1,000, with the continuation rule.
• NYSIF, Domestic Workers — New York's 40-hour workers' compensation coverage requirement, quoted above. One state's rule, shown as an example, not a national standard.
• Cal. Labor Code 1454 — personal attendant overtime after nine hours a day or 45 a week.

This page is general information, not legal, medical, or financial advice. See the terms.