Paid Family Caregiver Through Medicaid: Who Sends Your W-2 or 1099?

If you're a paid family caregiver through Medicaid, your W-2 or 1099 comes from whoever the program makes your legal employer, or from the payroll agent working for that employer. That's why the envelope can arrive from a company you've never dealt with, or carry your own mother's name as the "employer." The answer depends on how your program is set up. Below is how to tell which kind of program pays you, who should be sending your tax form, and what to do if the form looks wrong.

In This Guide

• Which Medicaid Program Pays You as a Family Caregiver?
• Self-Direction Through a Fiscal/Employer Agent
• Agency With Choice and Other Agency Employers
• Structured Family Caregiving: Employee or Contractor?
• An Example: How It Works in Ohio
• When Your W-2 or 1099 Looks Wrong
• Frequently Asked Questions
• Learn More

Which Medicaid Program Pays You as a Family Caregiver?

Being paid to care for someone you love is a gift and a job at the same time, and the paperwork rarely explains itself. The fastest way to make sense of your tax form is to work out which delivery model your state's Medicaid program uses for you. Look at who you signed hiring paperwork with, who approves your timesheets, and whose name is on your pay stub.

The Centers for Medicare & Medicaid Services (CMS) describes four financial management models that states use for self-directed services, and they differ on exactly the question your tax form turns on: who is your employer.2

The F/EA, AwC and PA rows come from CMS's description of the four models.2 The W-2 rules in the last column come from the IRS.1,3 The Ohio row is covered in the Ohio example below.4

Self-Direction Through a Fiscal/Employer Agent

In the government and vendor fiscal/employer agent models, CMS says the person receiving care (or their representative) is the common law employer, the legally responsible employer of the workers they hire, supervise and discharge directly.2 So if you're paid to care for your dad through one of these programs, your dad is your employer on paper, even though a payroll company cuts the checks.

That payroll company is usually what the IRS calls a Section 3504 agent, and CMS describes the employer agent in Medicaid's fiscal/employer agent models as exactly this kind of agent.1 Here's what the IRS says a Section 3504 agent does:

• Files the employment tax returns. The agent files one return per period covering every employer it represents, under its own name and EIN, with a schedule listing each employer.1
• Sends your W-2. The agent generally files one Form W-2 for each employee, with the agent's EIN and the agent's name followed by "Agent for (name of employer)." For a home care service recipient, the agent files the W-2 on that person's behalf unless the pay is excepted from both income tax withholding and Social Security and Medicare tax.1
• Needs your employer's EIN. The IRS requires every home care service recipient to get an EIN, because the agent must identify each employer by EIN.1

Payroll agents in these programs go by several names. A financial management services (FMS) entity, a fiscal/employer agent and a fiscal intermediary are all names for the same back-office role, which handles payroll and the withholding, filing and payment of employment taxes.5

What this means for the person you care for

If you're the care recipient, or the adult child helping them as a representative, two things are worth knowing. The IRS's Schedule H instructions say that if a government agency or third-party agent reports and pays the employment taxes on your household employee's wages for you, you don't file Schedule H to report those taxes.1 But handing payroll to an agent doesn't hand off the responsibility: the IRS treats the agent and the employer as jointly and severally liable for the employment taxes and penalties the agent takes on.6

That's a reason to keep copies of what the agent sends you, not a reason to worry. It simply means your parent stays the employer in the IRS's eyes.

Agency With Choice and Other Agency Employers

Agency with choice is a joint employer model. CMS describes the agency as the "primary" employer and the person receiving care, or their representative, as the "secondary" or "managing" employer.2 Pennsylvania's regulation, for example, defines agency with choice as a model in which the agency is the common law employer.2

When an agency is a caregiver's employer, the IRS says Medicaid waiver payments are subject to Social Security and Medicare tax. Even Medicaid waiver payments that are excludable from income tax generally count as Social Security and Medicare wages when an agency is the caregiver's employer, and the agency generally should withhold those taxes and report the wages on the caregiver's Form W-2.3 If you're unsure whether the agency or the person you care for is your employer under your program, ask the agency directly and ask which entity's name will appear on your W-2.

Structured Family Caregiving: Employee or Contractor?

You may have read online that structured family caregivers are independent contractors who don't pay Social Security. If that's what you were told, you're not alone, and you didn't miss something obvious: programs use these labels loosely. The answer matters for your take-home pay, because it decides whether Social Security and Medicare tax comes out of each paycheck and which form you file your taxes with. The IRS doesn't decide this by the name of the program. It asks one question for every Medicaid waiver payment: who does the caregiver actually work for, judged by who has the right to direct and control how the caregiver does the work.3

The IRS answer has three branches:

• The agency is your employer. The payments are subject to Social Security and Medicare tax and reported on your W-2.3
• The person you care for is your employer. The payments are subject to Social Security and Medicare tax unless a domestic-service exception applies, such as the family exceptions in When Your W-2 or 1099 Looks Wrong.3
• You're a genuine independent contractor. The payments aren't subject to Social Security and Medicare tax.3

A contractor label on its own doesn't settle it. Under the Treasury employment-tax regulation, if an employer-employee relationship exists, calling the worker an independent contractor makes no difference.7 The IRS also says in-home caregivers are typically employees of the people they care for, because those people have the right to tell them what needs to be done.8

An Example: How It Works in Ohio

Ohio shows how these rules play out in one state. Under Ohio Structured Family Caregiving, the provider must be an agency provider, and the rule refers to "the caregiver employed by or contracted with the agency provider."4 For an Ohio SFC caregiver, then, the relationship that decides the tax form is the one with the SFC agency, and the rule allows either kind. Ask your agency whether you're its employee or its contractor, because the IRS treatment above follows that answer.

Ohio's financial management service is a separate track. Ohio defines its FMS as the entity contracted to process payment of participant-directed waiver services, and the Ohio Department of Aging's list of participant-directed services on PASSPORT and MyCare names two options: the Choices home care attendant service (C-HCAS) and Consumer Directed Personal Care Service (CD-PCS).4

For C-HCAS, Ohio's rule makes the person receiving the service the employer of record, and the FMS acts as the agent of that common-law employer.9 On the Ohio Home Care Waiver and MyCare, the Ohio Department of Medicaid says a representative may help with employer tasks but can't be the employer or the caregiver.9 Ohio families can find the program details in our Ohio guide to self-directed paid caregiving.

When Your W-2 or 1099 Looks Wrong

A form that doesn't match what you expected is stressful, especially when you're already stretched thin. Most of the time, one of these situations explains it.

Social Security was withheld, but you're the spouse

The IRS says the family exceptions can still apply when a Medicaid program pays you. If the person you care for is your employer and a payer handles the employment taxes for them, payments for services performed for a spouse or a child, and services performed for a parent by a child under age 21, generally aren't subject to Social Security and Medicare tax.3 Domestic-service wages below an annual threshold aren't subject to them either. For 2026, a household employer who pays one household employee less than $3,000 in cash wages for the year doesn't owe Social Security and Medicare tax on those wages.7

If those taxes were withheld from you in error, the IRS's Notice 2014-7 questions and answers say to ask the agency that withheld them for a refund first, and to file Form 843 if the agency says it won't correct them.3 If the agency itself is your employer, though, the IRS says the payments are subject to Social Security and Medicare tax.3

Social Security was withheld, and you're an adult child

Withholding is usually correct for an adult son or daughter. The federal exclusion covers a child's wages from a parent only while the child is under age 21, so a parent's pay to a son or daughter aged 21 or older counts like any other employee's.10

You got a 1099-MISC instead of a W-2

In its family-caregiver FAQs, the IRS describes a family member paid by a state agency or insurer who receives Form 1099-MISC with the amount in Box 3 as other income. That caregiver doesn't owe self-employment tax on it if they aren't in the business of providing care, and reports it as other income on Schedule 1.8 By contrast, the IRS's example of a caregiver who runs a care business and receives a Form 1099-NEC owes self-employment tax and files Schedule C and Schedule SE.8 The IRS's family caregivers and self-employment tax page walks through both examples, and neither involves pay excluded under Notice 2014-7.

Excludable waiver payments follow a different route, even when they arrive on a Form 1099-MISC or 1099-NEC. The IRS says Medicaid waiver payments that are excludable under Notice 2014-7 aren't self-employment income and aren't subject to self-employment tax, even for a caregiver who runs a home care business.3 A caregiver with no care business enters the 1099 amount on Form 1040 line 1d and backs the nontaxable amount out on Schedule 1 line 8s; a sole proprietor reports the full amount on Schedule C and lists the excludable amount as an expense marked "Notice 2014-7."3 Whether your payments qualify is covered in our guide to whether Medicaid waiver payments are taxable.

Box 1 of your W-2 is blank, or no form came

If you live with the person you care for, a blank or zero Box 1 on your W-2 is the expected result of the Notice 2014-7 income exclusion, not a payroll error.3 The IRS also tells a payer that knows your payments are excludable under Notice 2014-7 not to file a Form 1099-NEC for them, so you may receive no 1099 at all.3 Whether your pay is taxable, and how to report it, is its own question. Our guide to whether Medicaid waiver payments are taxable covers it step by step, including the separate Social Security question.

What This Guide Doesn't Cover

This page is about who sends the form. If your family hires a caregiver privately, outside any Medicaid program, the household-employer steps (EIN, I-9, Schedule H and the W-2 deadline) are in our guide to paying a caregiver: W-2 or 1099, and the hiring side is in how to hire an in-home caregiver. For workers' compensation and liability when a family member is paid, see workers' comp and liability for family caregivers.

Learn More

Find personalized help sorting out your caregiver pay and tax forms at brevy.com.

The information on Brevy.com is for educational purposes only and is not a substitute for professional legal, financial, or medical advice. Rules vary by state and program and change frequently. Always verify with the relevant agency or a qualified professional. Brevy is not a law firm, financial advisor, or healthcare provider.