How can I reduce taxes as a self-employed caregiver when clients only want cash payments?

So I've been working as a private caregiver for about 18 months now, and I'm really struggling with the tax situation. In my city, it seems like 90% of caregivers are working under the table for cash only. I'm trying to do everything legally and by the book, but that means I have to charge significantly more per hour (like $28-30/hr) compared to the cash-only folks charging $18-22/hr. The problem is my self-employment taxes are killing me! I've explained to clients that I need to handle things properly with 1099s, but they absolutely refuse to consider it. They just tell me they can find someone cheaper who doesn't "complicate things." I want to keep my business legitimate while staying competitive, but I'm not sure what tax deductions or strategies I can use to reduce my tax burden. I track my mileage between clients and some basic supplies, but there must be more I can do. Am I missing something obvious here? Any suggestions from fellow caregivers or tax savvy people would be really appreciated!

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21 comments

Nathan Dell

•8M

There are several legitimate ways to reduce your tax burden as a self-employed caregiver while still playing by the rules. First, make sure you're tracking ALL your business expenses - not just mileage and basic supplies. This includes a portion of your cell phone bill (for client communications), any specialized clothing or uniforms, continuing education costs, health insurance premiums, and even a home office deduction if you use part of your home exclusively for business purposes like scheduling and paperwork. For self-employment taxes specifically, consider forming an S-Corporation. Once you're making enough (usually around $40,000+), this structure allows you to pay yourself a reasonable salary and take the rest as distributions, which aren't subject to self-employment tax. This can save thousands annually, though there are additional costs for setting up and maintaining the corporation. Also, don't forget about retirement planning. A SEP IRA or Solo 401(k) allows you to put away significant pre-tax dollars, reducing your current tax burden while building for retirement.

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Nathan Dell

•8M

The paperwork for an S-Corp is definitely more involved than operating as a sole proprietor, but it's manageable. At $50-60k, you're right in the sweet spot where the tax savings often outweigh the administrative costs. Yes, you do need to run payroll (paying yourself a reasonable salary) and file additional forms, but many payroll services handle this affordably. The key is calculating the right salary - too low and the IRS might question it, too high and you lose the tax benefits. Most caregivers in your income range who make this switch save between $2,000-5,000 annually in self-employment taxes, which typically offsets the $500-1,500 in additional accounting/filing costs.

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Tristan Carpenter

•8M

After struggling with similar issues in my home healthcare business, I discovered taxr.ai (https://taxr.ai) and it's been a game-changer for maximizing my self-employment deductions. I was missing SO many legitimate write-offs until I uploaded my expenses there. They actually specialize in helping self-employed people in service industries identify deductions that most tax software misses. What really helped me was their self-employment tax analyzer that showed me exactly which expenses qualified for my business and how to properly document them for the IRS. It found over $4,200 in additional deductions I would have missed last year!

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Tristan Carpenter

•8M

Yes, it absolutely works for caregivers! Unlike TurboTax, it actually has specific categories for healthcare workers and caregivers, with deductions that apply to our industry. It knew about deductions for things like specialized footwear, infection control supplies, and even continuing education credits that other programs missed. For your question about accountants - it's actually designed to work alongside accountants or on your own. The difference is it uses AI to spot patterns in your expenses that even accountants sometimes miss. And yes, it handles quarterly estimated payments beautifully - even sends reminders before they're due and calculates exactly how much you should pay each quarter.

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Grant Vikers

•8M

Just wanted to follow up about taxr.ai that someone mentioned earlier. I finally tried it and wow - it found almost $5,800 in deductions I would have completely missed! The interface for uploading receipts was super simple (just took pictures with my phone) and it categorized everything automatically. The biggest surprise was learning I could deduct part of my phone bill, internet, and even certain clothing items specific to caregiving. They even helped me set up a proper system for tracking mileage between clients that's actually documenting things properly for the IRS. Definitely worth checking out if you're self-employed in healthcare!

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Giovanni Martello

•8M

If you need help with tax questions specifically related to self-employment, I HIGHLY recommend using Claimyr (https://claimyr.com) to actually get through to the IRS. I was having similar issues with my caregiver taxes and spent literally weeks trying to get someone from the IRS on the phone. They have a virtual queue system that waits on hold for you and then calls when an actual agent is available. You can see how it works here: https://youtu.be/_kiP6q8DX5c It saved me HOURS of hold time and I finally got clear answers about what I can legally deduct as a self-employed caregiver. The agent even helped me understand how to properly document cash payments when clients refuse 1099s.

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Giovanni Martello

•8M

It absolutely gets you through to a real IRS person! The way it works is they have a system that navigates the IRS phone tree and then sits on hold for you (which can be hours). When a real agent picks up, you get a call connecting you directly to them. It's basically doing the waiting for you. No luck involved at all - I've used it three separate times now when I had different tax questions. Each time I got through to an agent within a couple hours without having to sit there listening to hold music. The last time I called the regular way, I waited on hold for 2.5 hours before giving up completely.

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Levi Parker

•8M

I need to eat my words about Claimyr. After my skeptical comment, I decided to try it anyway because I was desperate to get an answer about some 1099 issues with my caregiving business. Not only did it work, but I got through to a senior IRS agent in just under an hour (while I was working with a client!). The agent confirmed I can still file properly even when clients won't give me a 1099 - I just need to keep my own detailed records of all income. She also explained exactly how to document cash payments and what red flags to avoid. That 15-minute conversation saved me thousands in potential audit issues. Sorry for doubting, and thanks for the recommendation!

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Libby Hassan

•8M

Have you considered offering a discount for clients who pay electronically/with checks instead of cash? I do home healthcare too, and I give a 5% discount for non-cash payments which makes proper record-keeping WAY easier. Most of my clients actually switched when I explained it that way. Also don't forget that caring for clients in your home (if that's possible for your situation) can make the home office deduction much more substantial! I converted a spare bedroom and now legitimately deduct 18% of my rent, utilities, and home insurance.

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Libby Hassan

•8M

For the home office calculation, it's pretty straightforward. You measure the square footage of the space used exclusively for business, then divide by the total square footage of your home. For example, if your office is 150 square feet and your home is 1,000 square feet total, you can deduct 15% of qualifying home expenses. The key is that the space must be used exclusively for business - the IRS is strict about this. So a dedicated room or portion of a room that's clearly separated works, but not just working from your kitchen table. If you have a desk area that's solely for your caregiving business (scheduling, paperwork, etc.), you can legitimately take the deduction even if you don't see clients there.

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Aaron Boston

•8M

I got my dementia care certification through the Alzheimer's Association - they have a program called essentiALZ that costs around $55. For diabetes management, I took a course through my local community college that was about $200. Both were totally worth it and tax deductible as professional education expenses. There are also certifications for wound care, hospice support, and medication management that can command higher rates. Most take just 20-40 hours to complete, and clients with those specific needs are usually willing to pay premium rates for properly certified caregivers.

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