Youve hired someone to care for your aging parent, and theyve become part of the family. Inevitably, however, youre faced with how to report your caregivers salary. Do you do it above the table, or under the table?

Weve all heard the horror stories in the national media about public figures with illegal household employees, or public figures who did not pay those employees above the table. What you may not realize is that you dont have to be a public figure to have those troubles.

Household employee is a very broad term it encompasses babysitters, nannies, companions for the elderly or infirm, maids, caretakers, nurses, nurses aides, housekeepers, cooks, butlers, family chauffeurs, and some home maintenance personnel.

Over the past several years there has been an incredible increase in the household hiring of eldercare providers, such as nurses, nurses aides and other caregivers. According to a recent report from the National Center for Health Statistics, more than 1.4 million adults over 65 years of age regularly receive visits from paid caregivers.

Television, radio, magazine and newspaper stories about The Sandwich Generation-- meaning baby-boomers caring for both their own children and their aging parents -- are becoming more frequent. In fact, NBC Nightly News with Brian Williams and Business Week magazine both recently devoted considerable attention to this important issue.

In 2005, statistics from the U.S. Department of Labor estimated that the number of people in older age groups, with much greater than average health care needs, will grow faster than the total population by 2014. The number of home health care providers also will increase rapidly as life expectancies rise and as aging children who are less able to care for their elderly parents rely more on professional care.

Eldercare issues are affecting an increasingly wider segment of the population as the first wave of baby boomers turns 60. Nearly 15 million of those baby boomers are managing both full-time employment and the added (forgive us) burden of caring for an elderly or disabled family member. It is estimated that 37 percent of those workers in the baby boomer or sandwich group spend more time and money caring for their elders than for their own children.

Even more incredible, 65 percent of family members who worked while caring for an aging parent experienced conflict with their jobs, including tardiness, lost hours or income, or sacrificing of vacation time. Because the majority of our elders prefer to remain in the privacy of their own homes, the problems will only continue to grow.

With the older population in the United States on the rise, the need for household employees to provide care to them, as well as the need for the household employer to comply with payroll tax laws for those employees, is greater than ever.

Sure, you can save a little money and decrease paper work by paying a household employee under the table. But the important thing to remember is that with those benefits comes one considerable danger it is illegal. The risks and penalties of being caught far exceed the short term benefits of paying your employee under the table. Paying above the table is the law and provides important benefits and protections for everyone involved.

Many people pay their care provider under the table not because they are trying to avoid the law, but because they simply do not understand that the payroll tax laws apply to them. A brief overview of these tax laws as they apply to household employees therefore is in order.

Is your eldercare provider really your employee? Generally a household employee is anyone who works in your home under your supervision and direction, and includes babysitters, maids, nannies, health aides, nurses, caretakers, and other similar domestic workers.

A person is not your employee if that person controls most aspects of the work they do and, essentially, is their own boss. A self-employed worker or independent contractor, generally, will bring her own tools or equipment to your home, sets her own work schedule or hours, and usually also offers her services to the public as an independent business.

Most importantly, in the current climate, and perhaps one of the biggest danger areas for household employers, is the responsibility to determine whether your domestic employee can legally work in the United States. You must understand that it is not legal to knowingly hire or continue to employ an immigrant who is not legally allowed to work in the United States.

Although compliance with payroll tax laws may appear complicated at first, federal law only requires a household employer to be responsible for the Social Security and Medicare taxes owed on a care givers salary (collectively referred to as the FICA tax), and to pay a modest federal unemployment tax. You are required to withhold half of the FICA tax from your employees pay, and then you must pay the other half of the tax from your own pocket. Federal law permits you to withhold federal income tax from your employees salary if both you and the care provider agree.

Depending upon your state, you may also be responsible for certain state taxes, such as disability insurance and employment training taxes, some of which are the employers obligation and others of which may be the employees.

Paying above the table not only keeps you legal, but it also provides your employee a financial safety net by enabling them to apply for unemployment or disability benefits if needed. Likewise, when you pay your domestic employee legally, she earns credits toward Social Security benefits at retirement and will have a verifiable salary history to enable her to apply for credit cards, car loans or other forms of credit.

Now that you know the advantages of paying above the table, how do you keep up? How do you manage a household payroll and keep it all legal?

In part two of this article, well discuss several options, including one that is designed specifically for this purpose, called ElderCarePay (http://www.ElderCarePay.com).

Jim DeLorenzo started his public relations career in the early 1980s while he was still a student at Villanova University (outside Philadelphia, Pennsylvania). Hes worked in a variety of industries, including sports and entertainment, technology, financial services and professional services. In 1999, he opened his own strategic public relations consulting practice (operating as JHD Enterprises, LLC). He can be reached by e-mail at jim@jhdenterprises.com. Additional information is available at his web site, http://www.JHDEnterprises.com, and at http://www.ElderCarePay.com

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