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Run the Payroll Fee Auditor →Blog · Payroll Management · Home Health
Home Health Agencies: Payroll Setup Guide (2026)
Setting up home health agency payroll means the standard registrations, an EIN, state withholding and unemployment accounts, new hire reporting, plus the home health agency specifics: pay codes for visit-based aide pay and travel time reimbursement and a documented classification for registered nurses and LPNs. BEG: $45 per employee per month inside the payroll software you already use, live in 3 to 5 days.
Step 1: accounts and registrations
Every home health agency starts with an EIN, a withholding account in each state where someone works (unless that state has no wage tax), an unemployment insurance account in each of those states, and access to each state's new hire directory. New employers deposit federal employment taxes monthly during the first calendar year because there is no lookback period yet.
Step 2: classify registered nurses and LPNs before the first check
Home health aides, personal care aides and nurses working in private homes are domestic service employees covered by the FLSA. A worker on 24-hour shifts who does not reside on the premises permanently or for extended periods is not a live-in worker and is owed overtime after 40 hours.
Step 3: build the home health agency pay codes
Visit-based aide pay, travel time reimbursement, Medicaid billing vs payroll and live-in caregiver rules each become a pay code with its own taxability and overtime treatment. Building them before the first run is cheaper than correcting a quarter of 941s afterward.
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.
Step 4: set the records up to be kept
Section 12006(a) of the 21st Century Cures Act requires states to use electronic visit verification for all Medicaid personal care services that require an in-home visit since January 1, 2020 and for home health services since January 1, 2023. States that fail to comply face federal matching reductions of up to 1 percent.
Medicare-certified home health agencies must document that each aide completed at least 75 hours of training with at least 16 classroom hours before 16 supervised practical hours, passed a competency evaluation performed by a registered nurse, and receives at least 12 hours of in-service training in every 12-month period. The agency must maintain documentation showing each standard was met.
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.
- Home health aides, personal care aides and nurses working in private homes are domestic service employees covered by the FLSA. A worker on 24-hour shifts who does not reside on the premises permanently or for extended periods is not a live-in worker and is owed overtime after 40 hours. [DOL Fact Sheet #79D]
- 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)]
- Section 12006(a) of the 21st Century Cures Act requires states to use electronic visit verification for all Medicaid personal care services that require an in-home visit since January 1, 2020 and for home health services since January 1, 2023. States that fail to comply face federal matching reductions of up to 1 percent. [CMS Medicaid.gov Electronic Visit Verification]
- Medicare-certified home health agencies must document that each aide completed at least 75 hours of training with at least 16 classroom hours before 16 supervised practical hours, passed a competency evaluation performed by a registered nurse, and receives at least 12 hours of in-service training in every 12-month period. The agency must maintain documentation showing each standard was met. [42 CFR 484.80]
Read the full guide to how to set up payroll for a new business, and the rest of the home health agency payroll library.
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Frequently Asked Questions
What registrations does a new home health agency need before running payroll?
An EIN, a state withholding account and a state unemployment account in every state with an employee, and new hire reporting access. State registrations are the slow step and can take weeks, so they start before the first hire date.
How are registered nurses and LPNs classified at setup?
Home health aides, personal care aides and nurses working in private homes are domestic service employees covered by the FLSA. A worker on 24-hour shifts who does not reside on the premises permanently or for extended periods is not a live-in worker and is owed overtime after 40 hours.
What records must a home health agency keep from day one?
Section 12006(a) of the 21st Century Cures Act requires states to use electronic visit verification for all Medicaid personal care services that require an in-home visit since January 1, 2020 and for home health services since January 1, 2023. States that fail to comply face federal matching reductions of up to 1 percent.
What does managed payroll cost for a home health agency?
$45 per employee per month, all-inclusive, inside the payroll software you already use, with no 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 $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: U.S. Department of Labor: Wage and Hour Division
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