When working with caregiver agreements, it is important to remember the tax implications. This link takes you to the IRS guide for wages paid in 2011.
If you pay a household worker $1,700 or more in cash wages during 2011, you must deduct Social Security and Medicare taxes and report the wages once a year. This includes reporting any cash you pay to cover the cost of the employee’s transportation, meals or housing. If you do not report the wages on time, you may have to pay a penalty in addition to the overdue taxes.
http://www.irs.gov/pub/irs-pdf/p926.pdf