Working for an Agency vs. Being an Independent Contractor or Household Employee

Being your own boss sounds great in any profession, including senior home care. Due to the growing demand for professional in-home caregivers, most have the option of being self-employed or working for a home care agency. If you live in Sedona, Arizona and currently find yourself in this position, there are pros and cons of each. Should you work for an agency or work for yourself? Read on to learn more about how to answer that life-changing question.

Working for Yourself as a Senior In-Home Caregiver

For reasons that include the potential to earn more money, be your own boss, and create your own schedule, working for yourself can be tempting. But there are also pitfalls to working as an independent caregiver; ones you need to be made aware of.

For starters, professional in-home caregiving comes with high risk. After all, another human being’s health and even life are in your hands. You may also find yourself working one-on-one with clients in their private residences with no one else around. When self-employed, it’s your responsibility to obtain sufficient liability coverage and ensure you are working with trustworthy individuals.

If you wish to obtain additional training or certifications to specialize in an area such as Alzheimer’s or dementia care, you’ll need to do that on your own too. Notably, if you are new to a community like Sedona, you’ll also have to market your services until you can get enough clients to pay the bills.

Then, and perhaps most importantly, there are the federal income tax implications. While it may seem logical for you as an independent contractor to file your taxes using Form 1099, the IRS may have other ideas. In Publication 926, the IRS clearly states that domestic workers (those who work in a family’s home) are considered to be household employees (W-2) and not independent contractors (1099).

Which filing option should I use?

The main difference between employees and independent contractors is the tax forms they must file. As a household employee, you are required to file your personal income tax return using a W-2 form, which shows the wages you earned and the taxes your employer – or employers –withheld from you throughout the year.

Your employer, in this case, your caregiving client, should provide a W-2 form by the end of January following the year in which you worked for them. Conversely, independent contractors file Form 1099 themselves to report payments they’ve received throughout the year and taxes they’ve paid to the IRS.

How can I tell if I’m a household employee or an independent contractor?

In addition to income tax reporting, the IRS says that the distinction between an employee and an independent contractor relies on which party controls the working relationship. If the client dictates employment details, such as the days and hours you work or specific procedures you must follow, they are a household employer, and you are their employee (W-2).

Someone who is a rightful independent contractor notifies the client when they are available to work and arrive when it is convenient for them. That caregiver would perform their job on their terms and may have several other clients they are working with simultaneously. They would also be able to find other caregivers to relieve them when unable to work, which employees are rarely allowed to do.

What if I misclassify myself as an independent contractor?

When filing Form 1099, and because you are self-employed, you are required to pay twice as much (15.3% vs. 7.65%) in Social Security and Medicare taxes as would an actual employee. If misclassified as an independent contractor, you also won’t be eligible for unemployment benefits if you lose your job through no fault of your own.

Why? Because the client/family is not paying unemployment insurance taxes to the state like they would be if you were a household employee. When you file for benefits, the state will have no record of the client being an employer and will deny your claim until the client pays all back taxes due. Worse yet, you and the client could be audited and required to pay additional back taxes and fines.

Bottom line: According to the IRS, most professional caregivers hired directly by an individual are not independent contractors but rather household employees.

How does my IRS classification affect my clients?

Working for yourself can also be stressful for your clients. Because they are trying to make life easier and not harder, most seniors aren’t interested in becoming an employer, processing payroll, filing payroll taxes, and getting worker’s compensation and liability insurance.

The Benefits of Working for a Home Care Agency in Sedona, AZ

While working for an agency as a W-2 employee, they will handle the payroll obligations for you. In addition to reducing your risk of getting audited, these are other pros of working for a reputable home care agency:

Job Security

Most agencies are busy and constantly in need of caregivers, which means steady hours and reliable income for you. If your client no longer needs in-home caregiving, your employer will find you a new client. Not having to continuously market yourself and find new clients also means steady pay and more time for yourself.

Vetted Clients

One of the main advantages of working for a home care agency as a caregiver is that they assess and screen clients before you’re brought in. This fact can be a real time saver and safety enhancer if the potential client isn’t serious or seems difficult or unsafe to work with. Most agencies make every effort to match caregivers with compatible clients and families.

Team Camaraderie

Working solo while caring for elderly and disabled individuals can be emotionally draining. Even if you spend most days working one-on-one with clients, being part of an agency means working with a team of care managers, schedulers, trainers, and office staff that support you in your job and value a healthy work-life balance.

Less Stress

If you’re with an agency, you’ll spend most of your time caregiving rather than managing business operations. Your employer will handle most administrative tasks, including scheduling, billing, finding a backup if you need to call out, client follow-up, and marketing. Professional caregivers who work for themselves must find time for all these other duties.

Employee Benefits

Independent caregivers miss out on numerous money-saving employee perks, such as paid training, pay increases, health insurance including vision and dental, paid time off, paid holidays, incentive programs, bonuses, referral fees, and backup care providers. As an agency employee, you can take advantage of these benefits.

Take the Hassle Out of Caregiving by Working for Us

Are you tired of working for yourself or otherwise prefer not to? If so, Caring Hearts of Sedona invites you to join our winning team in Cottonwood, Camp Verde, Flagstaff, and Prescott, Arizona. Due to our expanding client load, we are currently seeking qualified individuals to fill several exciting caregiving positions. While proudly serving the Sedona area, we support clients and their families with services that include Personal Care, Respite Care, Private Duty Care, 24-Hour Care, Alzheimer’s and Dementia Care, and more.

As a highly valued member of the Caring Hearts of Sedona team, you’ll enjoy a fast-paced, positive work environment where your input is valued and hard work rewarded. We also offer competitive pay, flexible scheduling, ongoing staff training, and employee benefits. No matter your experience level or education, we’d love to hear from you! To learn more about our agency and our open positions, please visit us today at www.caringheartsofsedona.com.