Who handles payroll taxes for a privately hired caregiver?

The IRS treats a family that pays a caregiver directly as a household employer once wages cross the annual threshold (about $2,700 in 2026, indexed annually). That status brings a specific set of obligations. The family withholds the employee half of FICA and Medicare tax from each paycheck, pays the matching employer half, and remits the combined 15.3 percent to the IRS.

At tax time, the family files Schedule H with the federal return to report the wages and taxes, issues a W-2 to the caregiver by the end of January, and files a W-3 with the Social Security Administration. Michigan adds state unemployment insurance filings and, depending on wage level, state income-tax withholding. Late or missed filings carry penalties and interest.

A licensed home care agency is the employer of record for every caregiver on its roster. The agency withholds, remits, files, and issues W-2s as part of its operation. The family pays the agency’s hourly rate and receives an invoice — no household-employer paperwork, no quarterly filings, no year-end forms.

The trap: families sometimes pay a private caregiver in cash to avoid the paperwork. That creates unreported wage exposure for both parties, blocks the caregiver from earning Social Security credit, and typically voids long-term care insurance reimbursement (which requires paid, documented receipts).

For the full breakdown, see the cornerstone: Private Hire vs. Agency guide.