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The only caregivers I can get now want cash only, I talked to an agency and was told all of their workers just fill out a 1099.

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Are you getting receipts from them?   Personally, I'd be leery of those who will only take cash.   You need to focus on your needs as well, and those needs are documentation.
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They are employees. You need an elder care attorney or CPA to get your records legal for Medicaid. Not a do it yourself project.
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The cash you are giving caregivers is not being reported as income so yes Medicaid will see it as gifting. You would need them to agree that they got paid and they want cash so they don’t acknowledge to the government. If you are paying cash, short of a signed receipt and invoice you can’t prove anything. Their word against yours.
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There is a lot wrong here and I hope it doesn’t bite you in the end. These workers are employees and cannot be filing 1099s. If they work for an agency, they are supposed to be w-2 employees. You should not be paying cash if you hired them. And you should be withholding income tax and paying quarterly taxes.
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anonymous912123 Sep 2019
Yes, and there are more agencies out there.
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year 2021......
“Ms Helpme, upon evaluation of financial documentation submitted for your mother’s LTC Medicaid application on 8/9/2021, please provide a detailed record for the following:
2019 - $5,678.90 in checks to others & $12,345.67 withdrawn in cash
2020 - $11,213.45 in checks to others & $9,876.54 in cash.
In order for the State of Whatever to continue processing her Medicaid application, for each item provide a detailed record of what was paid along with receipts, invoices, personal care contracts, W-9, I-9, W-2 for 2019 & 2020, all IRS filings for 2019 & 2020. All items need to received by State of Whatever within 30 days of your receipt of this letter or the LTC Medicaid application will be removed from the system.”

Then what???
If you think Patsy Lou who has been paid $$ under the table is gonna nicely fill out info now, well imo not gonna happen. That is IF you can even find Patsy Lou now couple years later.

Realize in 2021, mom’s in a NH. LTC NH Medicaid application is done once they become & are a resident in a facility. There has been an admissions application & contract done between her & the NH. If she didn’t sign it then you as her contact on file or next of kin or nearest family member has signed it. Mom is creating a $$$ room & board bill each & every day she is there & once she files for Medicaid is having basically all her retirement &/or SS$ going to the NH as her copay. Mom will on her own have maybe 2k max in assets. Medicaid will send the request for info to you and CC to the NH as well. Ditto on if she should be determined to be ineligible or application is declined or suspended.

Unless you carefully & exactly signed each & every signature on the paperwork as “dpoa in your limited capacity” or whatever it needs be for your states laws on liability to not face the NH coming after you personally to pay mom’s bill, the NH will try to hound you to pay her bill.... and if not paid, then she gets a 30 day Notice from the NH to leave. Medicaid CC on correspondence to the facility puts them on alert that there are issues with the application.

30 Day Notice is very real. NH will not just blithely continue to have her stay at the place. Then what 2.0??
its years from now & mom is even more frail/ ill/ demented/ difficult.

really as others have written, you have to stop paying cash and either hire caregiver thru an reputable agency (who deal with the legal & tax stuff) or your mom hires them as household employees and mom files & pay all the taxes required as such. They can’t be 1099 contract labor. They won’t meet the IRS standards for contract labor
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Rosered6 Sep 2019
This is a good answer. The state will ask for very detailed information and not give you much time to comply.
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Be careful, very careful. Our CPA strongly advised us NOT to pay either cash or a personal check to a private pay caregiver even if they assure you that they will take care of taxes. Like it or not, the IRS has very specific rules as to what constitutes a contract worker versus an employee. I spoke to numerous private pay caregivers that I contacted through one of the largest on-line caregiving referral companies and everyone of them told me they accepted cash or personal checks and they would "take care of the taxes" because they were private contractors. Not true! You will become their employer and unless you are willing to go head to head with the IRS, don't do it. I even found one lovely and extremely well-qualified caregiver who wanted to negotiate that I pay her 50% in cash and that she would accept the other 50% as an employee with taxes withheld. Quite frankly, it ticked me off since my husband and I haven't gotten away with not paying our taxes! Also as difficult as my mom is, the agency just keeps replacing the caregivers she "dismisses" with another one and that would be a nightmare if I had to manage that!
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Well, the other posters on here have good advice re taxes, IRS, etc.  But if you must pay cash, could you demand a signed receipt?Frankly, I'm not in favor of trying end runs around the IRS. Time passes, you think everything is OK sort of, then the ceiling falls on you. A worker may claim they are "contract labor" but the critical thing is whether the IRS believes they are contract labor. A very different thing.
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These workers will not claim the income, you are being mislead. There are a lot of agencies out there, look for a reputable one.
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Thank you all for your answers, this is so hard, to worry about how far mom's money will go, the agencies charge so much more per house - terrible position to be in.
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Check into a payroll company. They process all the payroll and ensure that all the taxes and insurances are in place. You pay a fee for this service but it is usually cheaper than an agency or trouble because someone got injured. Some even offer insurance benefits for your employee. They may be called labor leasing companies or payroll agencies. Shop around to ensure a good fit for your needs.

You need to explain to the caregivers that mom will eventually need Medicaid and she can not qualify if their pay is not done legally. You need to protect mom. If they don't understand, are they really good caregivers?

Besides, it is illegal to earn money under the table and it puts you and mom at risk of a lawsuit in the event of an accident or injury. I guarantee that they will not say it's okay if the get hurt on the job, remember you are dealing with people that are potentially/probably committing tax evasion by being paid cash, speaks to their character.

Oh yes, the IRS will make you pay ALL the taxes that should have been withheld and paid, not a pleasurable payment to make.
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