Who the Legal Employer Is in Each Arrangement

Does Going Through an Agency Make Me the Employer?

No — not when you go through a licensed home care agency. The agency hires, trains, and pays the caregiver as its own employee, which makes the agency the legal employer, not the family that pays for the service. Where this gets less clear is everywhere else: a referral registry, a privately hired caregiver, or a public program that hands you a budget to hire your own help can all make the family the employer, even when the arrangement doesn't feel that different from using an agency.

The label on the service isn't what decides this — the legal test is about who actually controls the work, who pays the wages, and who bears the tax and liability obligations that come with employing someone.

What Makes the Agency the Legal Employer

A licensed home care agency employs its caregivers directly: it recruits, trains, schedules, and pays them, and for agencies operating in the Medicare-certified home health space, federal rules go further, requiring aide competency evaluation and ongoing supervision by the agency's own registered nurse 1Ref 1Office of the Federal Register (Code of Federal Regulations) (2025).42 CFR 484.80 — Condition of participation: Home health aide services.The federal training, competency-evaluation, and RN-supervision requirements for aides employed by Medicare-certified home health agencies, illustrating the degree of control that makes an agency the employer.. That level of control — deciding who works, how they're trained, and how their work is checked — is what makes an entity the employer under most legal tests, not just a matter of who happens to cut the paycheck.

Because the agency is the employer, it's also the one carrying the obligations that come with that role: payroll taxes, workers' compensation coverage, and liability if an employee causes harm on the job. The family is a customer of the agency's service, not a party to that employment relationship.

The Test Behind "Who Is the Employer"

Federal tax law doesn't ask what an arrangement is called — it asks who controls the work. The IRS's household-employer guidance walks through the test for whether someone paid to work in your home, including a caregiver, counts as your employee: broadly, if you decide what work is done and how it's done, you're the employer, regardless of how informal the relationship otherwise feels 2Ref 2Internal Revenue Service (2026).About Publication 926, Household Employer's Tax Guide.That the guide exists to help a family determine whether a worker they pay, including a caregiver, counts as a household employee based on who controls the work.. A caregiver hired through and paid by a licensed agency generally fails that test against the family, because the agency is the one directing and paying them.

The same guidance lays out what follows once that test is met on the family's side: Social Security and Medicare tax withholding, federal unemployment tax, and reporting on Schedule H with the household's own tax return 3Ref 3Internal Revenue Service (2026).Publication 926, Household Employer's Tax Guide (for use in 2026).The household employer's specific tax obligations once the employee test is met: Social Security and Medicare taxes, FUTA, and reporting on Schedule H with the household's own tax return.. None of that attaches to a family working with a true agency-employed caregiver, because the family was never the employer to begin with.

When You Are the Employer, Even Though It Doesn't Feel Like It

Several common paths into home care make the family, or an individual care recipient, the legal employer, even when the arrangement is set up through an organization. Hiring a caregiver privately is the clearest case: once cash wages cross the annual threshold, the household must report and pay Social Security and Medicare taxes on them, the same as any employer would 4Ref 4Social Security Administration (2026).Household Workers (SSA Publication No. 05-10021).That paying a household worker, such as a privately hired caregiver, cash wages at or above the annual threshold requires reporting wages and paying Social Security and Medicare taxes..

Public programs can create the same result. Medicaid's self-directed, or participant-directed, service option lets a beneficiary manage a budget and personally select, hire, train, and manage their own caregivers, which in most states makes the beneficiary or their representative the caregiver's employer even though a state program funds it 5Ref 5Centers for Medicare & Medicaid Services (2025).Self-Directed Services.That Medicaid self-directed service delivery lets a beneficiary manage a budget and personally select, hire, train, and manage their own caregivers, which can place the beneficiary in the employer role.. The VA's Veteran-Directed Care option works similarly: it gives an eligible veteran a flexible, counselor-supported budget to hire and manage their own workers, rather than paying the veteran directly or supplying an agency-employed aide 6Ref 6U.S. Department of Veterans Affairs (2024).Veteran-Directed Care — Geriatrics and Extended Care.That Veteran-Directed Care gives an eligible veteran a flexible, counselor-supported budget to hire and manage their own workers, rather than paying the veteran directly or supplying an agency-employed aide.. In both cases, the family is doing something that feels like using a program, but is legally doing the hiring.

What Employer Status Actually Obligates You to Do

Becoming the legal employer isn't just a label — it comes with specific, enforceable duties: withholding and paying the caregiver's share of Social Security and Medicare taxes, paying federal and often state unemployment tax, tracking hours correctly for wage and overtime purposes, and issuing a year-end tax form. None of this is optional based on how informal the arrangement felt when it started.

It also affects liability. An employer generally carries more responsibility for a worker's on-the-job actions and injuries than a customer does for a company's employee, which is part of why families who are the employer often need to independently arrange coverage — like a workers' compensation policy or a homeowner's liability rider — that an agency would have already carried on the caregiver's behalf.

How to Tell Which One You're In Before You Sign Anything

Before assuming an organization's involvement makes you a customer rather than an employer, ask directly: who pays the caregiver's wages, who withholds their taxes, and whose insurance covers them if they're hurt on the job. A true agency answers all three with itself. A registry that merely refers an independent caregiver, or a program that hands you a budget to manage, usually answers at least one of those with your own name instead.

Lined up together, the pattern is consistent:

Getting this wrong isn't just a paperwork problem — it can mean discovering the employer obligation only after a caregiver files for unemployment, is injured, or a tax return is examined. Confirming the arrangement in writing before care starts, and asking the three questions above by name, is the cheapest way to avoid finding out the hard way.