Payroll & Compliance For Care in Arizona

Hiring a caregiver to help your aging parent or loved one at home is a decision filled with both hope and complexity. While you're focused on finding the right person to provide compassionate care, there's another crucial aspect that often catches families by surprise: becoming an employer comes with significant legal and financial responsibilities.

If you're considering hiring a home care worker in Arizona—whether it's a part-time companion or a full-time caregiver—understanding your obligations as a household employer is essential. Let's walk through what you need to know to stay compliant while ensuring your caregiver is treated fairly and legally.

Are You Really an Employer?

The first question many families ask is whether they're actually considered an employer under the law. The answer is almost always yes. According to IRS guidelines, if you control not only what work is done but also how it's done, your caregiver is your employee—not an independent contractor.

This distinction matters enormously. Many families mistakenly believe they can simply pay their caregiver as a contractor and issue a 1099 form at year's end. However, misclassifying an employee as a contractor can lead to serious consequences, including tax penalties and liability for unpaid employment taxes.

The bottom line? If you're telling your caregiver when to arrive, what tasks to perform, and how to care for your loved one, you're an employer.

Understanding the "Nanny Tax" in Arizona

Once you've established that you're an employer, you'll need to navigate what's commonly called the "nanny tax"—though it applies equally to senior caregivers. These obligations exist at both federal and state levels.

Federal Tax Requirements

At the federal level, you'll need to:

Pay Social Security and Medicare taxes (FICA) if you pay your caregiver $2,800 or more in 2025. You'll withhold 7.65% from their wages and match it with another 7.65% from your own pocket.
Pay Federal Unemployment Tax (FUTA) if you pay $1,000 or more in any calendar quarter. This is typically 0.6% on the first $7,000 of wages per year.
File Schedule H with your personal tax return to report and pay these employment taxes annually.

Arizona State Requirements

Arizona has its own set of requirements:

State Unemployment Insurance (SUI) tax at 2.0% on the first $8,000 of wages for new employers

Quarterly Reporting Requirements

While federal employment taxes are typically filed annually with your personal tax return, Arizona requires quarterly reporting for state unemployment taxes. Every three months, you'll need to:

File Form UC-018 (Arizona Quarterly Unemployment Tax and Wage Report) with the Department of Economic Security
Report all wages paid during the quarter, even if they're below the taxable limit
Pay your SUI taxes by the last day of the month following the quarter's end (April 30, July 31, October 31, and January 31)

Missing these quarterly deadlines can result in penalties, so it's important to mark these dates on your calendar or use a payroll service that handles these filings automatically.

This is where many families feel overwhelmed. Clara facilitates connections with caregivers and can guide you toward resources that help manage these complex payroll requirements, ensuring you stay compliant without the headache.

Wage and Hour Compliance

Arizona has specific rules about how much and how often you must pay your caregiver:

Minimum Wage

As of 2025, Arizona's minimum wage is $14.70 per hour—significantly higher than the federal minimum of $7.25. Some cities have even higher rates:

Flagstaff: $17.85 per hour
Tucson: $15.00 per hour

Overtime Rules

Generally, you must pay overtime (1.5 times the regular rate) for any hours worked over 40 in a week. There are limited exceptions for live-in caregivers and those providing primarily companionship services, but these exemptions are narrower than many families realize.

Pay Frequency

Arizona law requires you to pay employees at least twice per month, with no more than 16 days between paydays. Monthly payment isn't allowed.

Mandatory Benefits: Paid Sick Leave

Under Arizona's Fair Wages and Healthy Families Act, most household employers must provide earned paid sick time. Your caregiver earns one hour of paid sick time for every 30 hours worked, up to 24 hours per year (for employers with fewer than 15 employees).

This sick time can be used for their own health needs, caring for family members, or dealing with domestic violence situations. You're required to track this time and include the available balance on each pay stub.

Workers' Compensation: Not Required, But Recommended

While Arizona law makes workers' compensation insurance optional for household employers, obtaining coverage is strongly recommended. Without it, you could be personally liable for all medical bills and lost wages if your caregiver is injured while caring for your loved one. The cost of a policy is minimal compared to the potential financial risk.

Getting Started: Essential First Steps

Ready to hire a caregiver? Here's your compliance checklist:

Obtain an Employer Identification Number (EIN) from the IRS (free and can be done online)
Register with Arizona's Department of Economic Security for an unemployment insurance tax account
Verify employment eligibility using Form I-9 within three days of hiring
Report your new hire to Arizona's New Hire Reporting Center within 20 days
Display required workplace posters about minimum wage and sick leave rights
Set up a system for tracking hours, calculating payroll, and maintaining records

The Companionship Exemption: Proceed with Caution

You may have heard about an exemption from minimum wage and overtime for "companionship services." While this exemption exists, it's extremely limited. If your caregiver spends more than 20% of their time helping with personal care tasks like bathing, dressing, or medication management, the exemption doesn't apply. Most families hiring senior caregivers find their workers quickly exceed this threshold.

Making It Manageable

If all of this feels overwhelming, you're not alone. Managing payroll taxes, tracking sick leave, filing quarterly reports, and maintaining proper records is a significant undertaking—especially when you're already dealing with the emotional and logistical challenges of caring for an aging loved one.

This is where Clara's approach to facilitating home care becomes invaluable. While Clara connects families with qualified caregivers, we also understand the importance of proper employment practices. We can guide you toward professional payroll services specifically designed for household employers, helping ensure that both you and your caregiver are protected.

Thinking about in-home care? Give us a call to see how we can help.

Hiring a caregiver to help your aging parent or loved one at home is a decision filled with both hope and complexity. While you're focused on finding the right person to provide compassionate care, there's another crucial aspect that often catches families by surprise: becoming an employer comes with significant legal and financial responsibilities.

If you're considering hiring a home care worker in Arizona—whether it's a part-time companion or a full-time caregiver—understanding your obligations as a household employer is essential. Let's walk through what you need to know to stay compliant while ensuring your caregiver is treated fairly and legally.

Are You Really an Employer?

The first question many families ask is whether they're actually considered an employer under the law. The answer is almost always yes. According to IRS guidelines, if you control not only what work is done but also how it's done, your caregiver is your employee—not an independent contractor.

This distinction matters enormously. Many families mistakenly believe they can simply pay their caregiver as a contractor and issue a 1099 form at year's end. However, misclassifying an employee as a contractor can lead to serious consequences, including tax penalties and liability for unpaid employment taxes.

The bottom line? If you're telling your caregiver when to arrive, what tasks to perform, and how to care for your loved one, you're an employer.

Understanding the "Nanny Tax" in Arizona

Once you've established that you're an employer, you'll need to navigate what's commonly called the "nanny tax"—though it applies equally to senior caregivers. These obligations exist at both federal and state levels.

Federal Tax Requirements

At the federal level, you'll need to:

Pay Social Security and Medicare taxes (FICA) if you pay your caregiver $2,800 or more in 2025. You'll withhold 7.65% from their wages and match it with another 7.65% from your own pocket.
Pay Federal Unemployment Tax (FUTA) if you pay $1,000 or more in any calendar quarter. This is typically 0.6% on the first $7,000 of wages per year.
File Schedule H with your personal tax return to report and pay these employment taxes annually.

Arizona State Requirements

Arizona has its own set of requirements:

State Unemployment Insurance (SUI) tax at 2.0% on the first $8,000 of wages for new employers

Quarterly Reporting Requirements

While federal employment taxes are typically filed annually with your personal tax return, Arizona requires quarterly reporting for state unemployment taxes. Every three months, you'll need to:

File Form UC-018 (Arizona Quarterly Unemployment Tax and Wage Report) with the Department of Economic Security
Report all wages paid during the quarter, even if they're below the taxable limit
Pay your SUI taxes by the last day of the month following the quarter's end (April 30, July 31, October 31, and January 31)

Missing these quarterly deadlines can result in penalties, so it's important to mark these dates on your calendar or use a payroll service that handles these filings automatically.

This is where many families feel overwhelmed. Clara facilitates connections with caregivers and can guide you toward resources that help manage these complex payroll requirements, ensuring you stay compliant without the headache.

Wage and Hour Compliance

Arizona has specific rules about how much and how often you must pay your caregiver:

Minimum Wage

As of 2025, Arizona's minimum wage is $14.70 per hour—significantly higher than the federal minimum of $7.25. Some cities have even higher rates:

Flagstaff: $17.85 per hour
Tucson: $15.00 per hour

Overtime Rules

Generally, you must pay overtime (1.5 times the regular rate) for any hours worked over 40 in a week. There are limited exceptions for live-in caregivers and those providing primarily companionship services, but these exemptions are narrower than many families realize.

Pay Frequency

Arizona law requires you to pay employees at least twice per month, with no more than 16 days between paydays. Monthly payment isn't allowed.

Mandatory Benefits: Paid Sick Leave

Under Arizona's Fair Wages and Healthy Families Act, most household employers must provide earned paid sick time. Your caregiver earns one hour of paid sick time for every 30 hours worked, up to 24 hours per year (for employers with fewer than 15 employees).

This sick time can be used for their own health needs, caring for family members, or dealing with domestic violence situations. You're required to track this time and include the available balance on each pay stub.

Workers' Compensation: Not Required, But Recommended

While Arizona law makes workers' compensation insurance optional for household employers, obtaining coverage is strongly recommended. Without it, you could be personally liable for all medical bills and lost wages if your caregiver is injured while caring for your loved one. The cost of a policy is minimal compared to the potential financial risk.

Getting Started: Essential First Steps

Ready to hire a caregiver? Here's your compliance checklist:

Obtain an Employer Identification Number (EIN) from the IRS (free and can be done online)
Register with Arizona's Department of Economic Security for an unemployment insurance tax account
Verify employment eligibility using Form I-9 within three days of hiring
Report your new hire to Arizona's New Hire Reporting Center within 20 days
Display required workplace posters about minimum wage and sick leave rights
Set up a system for tracking hours, calculating payroll, and maintaining records

The Companionship Exemption: Proceed with Caution

You may have heard about an exemption from minimum wage and overtime for "companionship services." While this exemption exists, it's extremely limited. If your caregiver spends more than 20% of their time helping with personal care tasks like bathing, dressing, or medication management, the exemption doesn't apply. Most families hiring senior caregivers find their workers quickly exceed this threshold.

Making It Manageable

If all of this feels overwhelming, you're not alone. Managing payroll taxes, tracking sick leave, filing quarterly reports, and maintaining proper records is a significant undertaking—especially when you're already dealing with the emotional and logistical challenges of caring for an aging loved one.

This is where Clara's approach to facilitating home care becomes invaluable. While Clara connects families with qualified caregivers, we also understand the importance of proper employment practices. We can guide you toward professional payroll services specifically designed for household employers, helping ensure that both you and your caregiver are protected.

Thinking about in-home care? Give us a call to see how we can help.

Hiring a caregiver to help your aging parent or loved one at home is a decision filled with both hope and complexity. While you're focused on finding the right person to provide compassionate care, there's another crucial aspect that often catches families by surprise: becoming an employer comes with significant legal and financial responsibilities.

If you're considering hiring a home care worker in Arizona—whether it's a part-time companion or a full-time caregiver—understanding your obligations as a household employer is essential. Let's walk through what you need to know to stay compliant while ensuring your caregiver is treated fairly and legally.

Are You Really an Employer?

The first question many families ask is whether they're actually considered an employer under the law. The answer is almost always yes. According to IRS guidelines, if you control not only what work is done but also how it's done, your caregiver is your employee—not an independent contractor.

This distinction matters enormously. Many families mistakenly believe they can simply pay their caregiver as a contractor and issue a 1099 form at year's end. However, misclassifying an employee as a contractor can lead to serious consequences, including tax penalties and liability for unpaid employment taxes.

The bottom line? If you're telling your caregiver when to arrive, what tasks to perform, and how to care for your loved one, you're an employer.

Understanding the "Nanny Tax" in Arizona

Once you've established that you're an employer, you'll need to navigate what's commonly called the "nanny tax"—though it applies equally to senior caregivers. These obligations exist at both federal and state levels.

Federal Tax Requirements

At the federal level, you'll need to:

Pay Social Security and Medicare taxes (FICA) if you pay your caregiver $2,800 or more in 2025. You'll withhold 7.65% from their wages and match it with another 7.65% from your own pocket.
Pay Federal Unemployment Tax (FUTA) if you pay $1,000 or more in any calendar quarter. This is typically 0.6% on the first $7,000 of wages per year.
File Schedule H with your personal tax return to report and pay these employment taxes annually.

Arizona State Requirements

Arizona has its own set of requirements:

State Unemployment Insurance (SUI) tax at 2.0% on the first $8,000 of wages for new employers

Quarterly Reporting Requirements

While federal employment taxes are typically filed annually with your personal tax return, Arizona requires quarterly reporting for state unemployment taxes. Every three months, you'll need to:

File Form UC-018 (Arizona Quarterly Unemployment Tax and Wage Report) with the Department of Economic Security
Report all wages paid during the quarter, even if they're below the taxable limit
Pay your SUI taxes by the last day of the month following the quarter's end (April 30, July 31, October 31, and January 31)

Missing these quarterly deadlines can result in penalties, so it's important to mark these dates on your calendar or use a payroll service that handles these filings automatically.

This is where many families feel overwhelmed. Clara facilitates connections with caregivers and can guide you toward resources that help manage these complex payroll requirements, ensuring you stay compliant without the headache.

Wage and Hour Compliance

Arizona has specific rules about how much and how often you must pay your caregiver:

Minimum Wage

As of 2025, Arizona's minimum wage is $14.70 per hour—significantly higher than the federal minimum of $7.25. Some cities have even higher rates:

Flagstaff: $17.85 per hour
Tucson: $15.00 per hour

Overtime Rules

Generally, you must pay overtime (1.5 times the regular rate) for any hours worked over 40 in a week. There are limited exceptions for live-in caregivers and those providing primarily companionship services, but these exemptions are narrower than many families realize.

Pay Frequency

Arizona law requires you to pay employees at least twice per month, with no more than 16 days between paydays. Monthly payment isn't allowed.

Mandatory Benefits: Paid Sick Leave

Under Arizona's Fair Wages and Healthy Families Act, most household employers must provide earned paid sick time. Your caregiver earns one hour of paid sick time for every 30 hours worked, up to 24 hours per year (for employers with fewer than 15 employees).

This sick time can be used for their own health needs, caring for family members, or dealing with domestic violence situations. You're required to track this time and include the available balance on each pay stub.

Workers' Compensation: Not Required, But Recommended

While Arizona law makes workers' compensation insurance optional for household employers, obtaining coverage is strongly recommended. Without it, you could be personally liable for all medical bills and lost wages if your caregiver is injured while caring for your loved one. The cost of a policy is minimal compared to the potential financial risk.

Getting Started: Essential First Steps

Ready to hire a caregiver? Here's your compliance checklist:

Obtain an Employer Identification Number (EIN) from the IRS (free and can be done online)
Register with Arizona's Department of Economic Security for an unemployment insurance tax account
Verify employment eligibility using Form I-9 within three days of hiring
Report your new hire to Arizona's New Hire Reporting Center within 20 days
Display required workplace posters about minimum wage and sick leave rights
Set up a system for tracking hours, calculating payroll, and maintaining records

The Companionship Exemption: Proceed with Caution

You may have heard about an exemption from minimum wage and overtime for "companionship services." While this exemption exists, it's extremely limited. If your caregiver spends more than 20% of their time helping with personal care tasks like bathing, dressing, or medication management, the exemption doesn't apply. Most families hiring senior caregivers find their workers quickly exceed this threshold.

Making It Manageable

If all of this feels overwhelming, you're not alone. Managing payroll taxes, tracking sick leave, filing quarterly reports, and maintaining proper records is a significant undertaking—especially when you're already dealing with the emotional and logistical challenges of caring for an aging loved one.

This is where Clara's approach to facilitating home care becomes invaluable. While Clara connects families with qualified caregivers, we also understand the importance of proper employment practices. We can guide you toward professional payroll services specifically designed for household employers, helping ensure that both you and your caregiver are protected.

Thinking about in-home care? Give us a call to see how we can help.