Since 1986, the national office of the Internal Revenue Service (IRS) has agreed with
SSA's position that individuals providing home-based care services in the Commonwealth
of Virginia are employees of the individuals receiving the services and that wages
for the services are subject to the Social Security taxes. Home-based care consists
of three services: companion, chore, and homemaker.
Ordinarily, as the employer, the service recipient would be responsible for withholding
taxes and reporting the wages. However, home-based care providers are normally paid
from Title XX, State, and local funds administered by a local Department of Social
Services (DSS). Section 3401(d)(1) of the Internal Revenue Code provides, for purposes
of income tax withholding, that if the person for whom an individual performs services
as an employee does not have control of the payment of wages for such services, then
the person having control of the payment of such wages is responsible for withholding
income taxes from the wages and reporting them to the IRS. The IRS advises that this
provision also applies to Social Security taxes. Therefore, since the local DSS has
control of the payment of wages to home-based care providers, the local DSS is responsible
for withholding and paying Social Security taxes to the IRS on their wages.