Home nursing care - employee or independent contractor?

• Author: Edwards, Ray

One of the areas causing arguments between taxpayers and the IRS today is whether certain workers should be treated as independent contractors or employees. Most often, this issue is raised in the normal trade or business environment and not for services performed in a taxpayer's home. However, the same withholding and payroll tax liability questions exist and must be addressed when a taxpayer retains a person to assist him at home. A worker's status will be determined from the nature of the services provided and not solely from his training or qualifications.

Rev. Rul. 61-196 indicated that licensed practical nurses (LPNs) were qualified semi-professionals who had completed a prescribed course of formal training and passed their state's licensing examination. As such, they are qualified to render nursing services in all but the most acute or complex cases. When performing private duty nursing, LPNs ordinarily have discretion in performing their nursing services. Even though they may be under the supervision of and follow instructions provided by an attending physician or registered nurse, they are not subject to the supervision or control of the patient for whom they are rendering services. In these situations, the LPN is much like a registered nurse providing private duty nursing and, as with a registered nurse, would be treated as an independent contractor. However, an LPN "who is engaged primarily to perform services of a household nature as distinguished from services involving the care of a private patient" would be considered an employee. Under Rev. Rul. 61-196, the pertinent factors to be considered are the type and nature of the services, the control exercised and by whom, whether the individual is licensed, and whether the services are performed in the conduct of an independent trade or business. The third and fourth factors are fairly easy to determine. However, additional facts are necessary for proper consideration of the first two factors.

Services normally expected of maids and servants (for example, bathing an individual, combing his hair, reading arranging bedding and clothing, preparing and serving meals, and occasionally giving oral medication left in their custody) would result in an LPN being treated as an employee. However, if these services are merely incidental to the providing of semi-professional nursing type services, independent contractor status may be retained.

Rev. Rul. 68-398 involved a patient in a hospital...