Dear Taxed in Michigan,
There are two related issues that arise from your questions. The first is to make a determination as to who the employer of record is. The second is to then determine who is responsible for paying taxes and taking care of other responsibilities and obligations that commonly pertain to employers.
In your question, you describe your living arrangement as being co-habitants of a house. Just so you know, your living arrangement, and who actually owns the house, how rent or payments are divided and paid, and so on have no bearing on the question of who is the employer responsible for paying taxes and other employment obligations.
I would need to get a bit more information from you in order to provide the most complete and helpful answer to your question. I will, nevertheless, attempt to provide as complete a generic answer as I can and you should consider and seek answers to the questions I raise below.
Your first question is: Are you an employee of your daughter, or are you self employed? To answer that question, first ask yourself:
Who hired you? Did your daughter? Are you affiliated with some type of agency? Where does the money come from; a state program such as a Medicaid HCBS Waiver? Is the money private, meaning does it derive from an insurance settlement or some kind of trust in your daughter’s name?
Who is paying you is a very important consideration in determining who the employer is; as you will see below.
There are usually state employment laws. You may want to check with your state employment department or state human resources department. You may be able to receive assistance from a state agency such as these. If you have the money, it might be a good idea to check with a lawyer knowledgeable about labor issues.
In general, the question of who is the employer is answered by going back into what is known as “common law”. “Common law” comes from ancient reasoning and understanding of legal concepts going clear back into ancient England before there were even written laws. The common law “test” for determining who is the employer contains the following considerations:
- Who pays the salary or wage? In other words, who you get your pay check from is often your employer.
- Who has the authority to hire and fire? The power to decide whether you are an employee is often vested with the employer.
- Who decides what duties or work you perform on the job? Who decides when you work? How do you perform the tasks? The actual work activities that you perform on the job and when you do them and how you do them are usually determined by the employer.
- Who trains you or teaches you the things you need to do in order to work and get paid? Training or teaching job duties are often employer roles.
- Who oversees the quality or other performance characteristics of your work? Overseeing and determining whether you are doing a good job, or not, is often something that the employer does.
- Who determines whether you get a promotion or a raise in wages? The employer often performs this function.
These common law characteristics are part of the basis for determining who is the employer. There is variation from state to state due to different state laws and state court rulings. In general, the more of these characteristics pertain to a given person or entity, the more that person or entity will be considered to be the employer. You should know that, for the most part, employer duties can be shared between two or more parties and employer duties can be contracted to third parties. Being an employer is not necessarily a “cut and dried”, “black or white” issue. For example, many companies contract payroll and tax payment duties to third party companies. This does not necessarily make the third party payroll company the employer just because they prepare and send someone their check.
Making this determination is important because employers have certain duties and obligations to their employees, including amongst other things as you point out, paying employer taxes. (I want to note that besides taxes, there are other local, state and federal withholdings that could be due such as FICA, workers compensation and unemployment just to name the most likely.)
You can also find more information on the administrative tasks of being an employer of a personal assistant, whether family member or not, at http://www.pascenter.org/pas_users/index_admin.php
Please try to answer the questions, above, and think about all of these issues. Again, I strongly recommend getting help from the appropriate state agency or an attorney, as well.
Yours truly,
Mike Oxford
