paying caregiver outside the home

[D_S3]

My sister had been a dependent on my father's taxes, who was gifting her for her help. My father passed away in January, and my mother does not have enough income to pay her for her caregiving.

I want to pay my sister as caregiver for my mother (not my household) so that my sister gets Social Security credits. I can’t pay my sister as a Household employee, since it is not my household. I do not have a business, so I can't have her as an employee. I am thinking I will need to pay her as I would an independent contractor.  I am not trying to get any tax credits, but need to know if I need to declare payments to her on my 2020 taxes.

Should my sister complete an SS-8 with me as the Firm?  Do I need to get an EIN to pay an independent contractor? I will be doing the taxes for both my sister and myself. 

[xmasbaby0]

I see no reason for your sister to have an SS-8 or for you to have an EIN in the situation you describe.  (Are you planning to dictate the days and hours your sister works as a caregiver?)  The SS-8 is used when there needs to be a determination of whether the person in question is an employee or an independent contractor.

For your sister:

https://ttlc.intuit.com/questions/2584365-am-i-an-employee-or-an-independent-contractor

The situation sounds like you just want to compensate your sister for caregiving and she can enter self-employment income on her own tax return--thereby earning some credits toward someday getting Social Security.  If she and your mom are not living in your household then your sister is not your household employee.

If your sister is an independent contractor, then she enters the income you pay her on her own tax return and pays self-employment tax to Social Security and Medicare, and perhaps ordinary income tax--depending on how much she is paid.

• https://ttlc.intuit.com/community/self-employed/help/what-is-the-self-employment-tax/00/25922

  How do I report income from self-employment?

One thing you have not mentioned----are you claiming your mother as a dependent on your own tax return?  If your mom has less than $4300 of income for 2020 (not counting Social Security) and you are paying for over half her support, then you might claim her as a dependent and get the $500 credit for other dependents on your tax return.  And if you are claiming Mom, then is the caregiving for medical reasons?  You *might* be able to claim the caregiving expense as a medical expense on your tax return.  But we need more information.

Thoughts?  @DoninGA?  @Opus 17?

[Opus 17]

In the simple case, this is family helping family and nothing has to be reported by anyone.  

If you want to deduct the cost as a medical expense, or claim the dependent care credit, or if you will be applying for reimbursement from Medicaid, or some other complication, then we need much more information.