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Run the Payroll Fee Auditor →Blog · Payroll Management · Home Health
Home Health Agencies: Integrating Benefits with Payroll (2026)
Benefits integration for home health agencies means every benefit deduction and every employer contribution flows through payroll with the right pre-tax or post-tax treatment, the ACA count runs from payroll hours, and the home health agency items cited here, IRS Notice 2014-7 Q&A (Q11, Q16. BEG: $25 per employee per month in your existing platform or $45 on isolved, live in 3 to 5 days.
Benefit rules that reach home health agencies
Medicaid waiver payments for care of an eligible individual who lives in the caregiver's own home are excludable from federal income tax under Notice 2014-7, so no income tax is withheld, but an agency that employs the caregiver must still withhold and pay Social Security and Medicare taxes. Excluded amounts go on Form W-2 box 12 with code II rather than box 1.
An agency may rely on a caregiver's written statement signed under penalties of perjury that the care recipient lives in the caregiver's home under the plan of care, and should not file Form 1099-NEC for payments it knows are excludable. Payments from the care recipient's private funds are not excludable.
What integration actually does
Section 125 pre-tax premiums come off before FICA and income tax; 401(k) deferrals come off before income tax only; Roth and most voluntary deductions are post-tax. Employer contributions are recorded per employee for the 401(k) census and Form 5500. Payroll hours feed the ACA full-time and full-time-equivalent count, and at 50 or more the offer of coverage is documented on Form 1095-C from that same data. For home health agencies with visit-based aide pay, the benefit base has to be defined per plan document, because the plan decides whether that pay counts as compensation.
The rules behind this page, with sources
General information, not legal advice. Every rule below was read on the agency page linked next to it.
- Medicaid waiver payments for care of an eligible individual who lives in the caregiver's own home are excludable from federal income tax under Notice 2014-7, so no income tax is withheld, but an agency that employs the caregiver must still withhold and pay Social Security and Medicare taxes. Excluded amounts go on Form W-2 box 12 with code II rather than box 1. [IRS Notice 2014-7 Q&A (Q11, Q16, Q18)]
- An agency may rely on a caregiver's written statement signed under penalties of perjury that the care recipient lives in the caregiver's home under the plan of care, and should not file Form 1099-NEC for payments it knows are excludable. Payments from the care recipient's private funds are not excludable. [IRS Notice 2014-7 Q&A (Q7, Q15, Q20)]
Read the full guide to benefits deductions in managed payroll, and the rest of the home health agency payroll library.
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Frequently Asked Questions
Benefits and home health agency payroll: IRS Notice 2014-7 Q&A (Q11, Q16, Q18)
Medicaid waiver payments for care of an eligible individual who lives in the caregiver's own home are excludable from federal income tax under Notice 2014-7, so no income tax is withheld, but an agency that employs the caregiver must still withhold and pay Social Security and Medicare taxes. Excluded amounts go on Form W-2 box 12 with code II rather than box 1.
Benefits and home health agency payroll: IRS Notice 2014-7 Q&A (Q7, Q15, Q20)
An agency may rely on a caregiver's written statement signed under penalties of perjury that the care recipient lives in the caregiver's home under the plan of care, and should not file Form 1099-NEC for payments it knows are excludable. Payments from the care recipient's private funds are not excludable.
Does visit-based aide pay count as compensation for a 401(k) match?
Only if the plan document says so. Plan compensation definitions vary, and payroll has to apply the definition the plan uses, not the one that seems natural. A mismatch is one of the most common plan failures found on audit.
What does managed payroll cost for a home health agency?
$25 per employee per month inside your existing platform or $45 on BEG's isolved HCM, all-inclusive, with a $500 monthly minimum. Visit-based aide pay, travel time reimbursement and Medicaid billing vs payroll are configured at setup, not billed as add-ons.
Related Resources
Anthony leads payroll solutions at Business Executive Group, a national managed payroll firm serving businesses across industries including Home Health Agencies. BEG manages payroll at $25-$45 PEPM, all-inclusive, with deep expertise in compliance, multi-state filing, and industry-specific payroll requirements. Get instant pricing at beghr.com.
Authoritative source: IRS: Affordable Care Act for Employers
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