Do I need to provide a tax form for Babybird's caregivers?

[Firebird]

Rocky Mtn Saver mentioned on another thread that you're required to provide an (independent, non-licensed) caregiver with a 1099 if you've paid them more than $600. 

Babybird has three daycare arrangements:

1)  Licensed DCP one day a week. Obviously, no tax forms needed for that one. 

2)  Unlicensed DCP #1 - my mom, ~3 days a week.  We pay her an average of $700/month.  When I researched this beforehand, I found out that you can "gift" up to $13k per year.  I figured she could consider her Babybird income a "gift" for tax purposes, since she's family and we haven't paid her more than $10k or so.  Is this okay?

3)  Unlicensed DCP #2 - our twice-weekly Babybirdsitter, ~1 day a week.  She is a SAHM buddy who has a son Babybird's age and watches her a couple times a week.  I have no idea if she watches other kids, but she averages $300-400/month watching ours.  I'd have to look at my records to see the exact total but it's well over $600. 

The last one is the one I'm most worried about, since she is neither licensed nor family.  Do I need to provide her with a tax form, and if so how do I do that?

(Rocky Mtn Saver - thanks for the post that brought this to my attention, by the way!)

[DVM gone riding]

on your mom--are you going to claim the money you pay her to get a child tax credit? You can't have it both ways but if you are not trying to deduct that money that should be fine you can report it as a gift. The #3 yeah you need a tax professional for that one!

[Firebird]

Jan 15, 2014 10:49:19 GMT -5 DVM gone riding said:

on your mom--are you going to claim the money you pay her to get a child tax credit? You can't have it both ways but if you are not trying to deduct that money that should be fine you can report it as a gift. The #3 yeah you need a tax professional for that one!

Nope, didn't plan to deduct the income to my mom (or the babysitter).  We can deduct the income to the licensed DCPs (there were two over the course of the year), but it's honestly not going to be much compared to the other two. 

Which is fine - I much prefer for my mom not to have to pay taxes on it.  We don't pay her that much, I want her to be able to keep it all.

Regarding the babysitter, if I do give her a 1099, do we get to deduct the money we paid her?  Is it okay to treat that money as a gift also? 

Also, we always get our taxes done at H&R Block.  Can they do the 1099 for us at the same time?

[Rocky Mtn Saver]

I'm not sure about the gifting idea, but you might post in the Tax forum and maybe MWCPA has thoughts on that. 

If you want to claim your expenses for the Child and Dependent Care Credit, you need to provide the TIN/SSN for your care provider.  They're now in the system as having received that income from you, so I'd provide a 1099 regardless of amount just to cover my own backside. 

I can't find on the IRS website if individuals are required to provide 1099's for private services, although other places indicate yes. 

www.ehow.com/about_5315484_do-babysitter-1099-tax-form_.html

The sitter is considered self-employed and must report her own income through self-employment.  I'm used to doing 1099's, but perhaps I'm overthinking the payer's end of things!

I'm sure MWCPA can provide a definitive answer. 

[Firebird]

Thanks, Rocky Mtn Saver!  8 Bit WWBG or mmhmm - can you please move this post to the tax forum? 

[Rocky Mtn Saver]

Jan 15, 2014 10:58:38 GMT -5 Firebird said:

Jan 15, 2014 10:49:19 GMT -5 DVM gone riding said:

on your mom--are you going to claim the money you pay her to get a child tax credit? You can't have it both ways but if you are not trying to deduct that money that should be fine you can report it as a gift. The #3 yeah you need a tax professional for that one!

Nope, didn't plan to deduct the income to my mom (or the babysitter).  We can deduct the income to the licensed DCPs (there were two over the course of the year), but it's honestly not going to be much compared to the other two. 

Which is fine - I much prefer for my mom not to have to pay taxes on it.  We don't pay her that much, I want her to be able to keep it all.

Regarding the babysitter, if I do give her a 1099, do we get to deduct the money we paid her?  Is it okay to treat that money as a gift also? 

Also, we always get our taxes done at H&R Block.  Can they do the 1099 for us at the same time?

The Child and Dependent Care credit is what you'll claim for childcare expenses paid in order for you to work.  to do this, you'll need to provide the caregiver's SSN/TIN and prove the expenses. 

www.irs.gov/uac/Ten-Things-to-Know-About-the-Child-and-Dependent-Care-Credit

[mmhmm]

I'll move it, Firebird.

[Rocky Mtn Saver]

Y'know, the more I think about this, the more I think that as an individual taxpayer (not a business), the 1099 is unnecessary.  There are other requirements if the sitter is watching your child in your home, but I presume she's not doing so? 

budgeting.thenest.com/need-give-babysitter-1099-tax-form-27559.html

Sorry if I created additional confusion... I'm used to dealing with 1099's at work. 

[Firebird]

No, Rocky Mtn Saver - sitter watches Babybird at her own house. 

Thanks, mmhmm!

[Deleted]

Jan 15, 2014 10:44:58 GMT -5 Firebird said:

2)  Unlicensed DCP #1 - my mom, ~3 days a week.  We pay her an average of $700/month.  When I researched this beforehand, I found out that you can "gift" up to $13k per year.  I figured she could consider her Babybird income a "gift" for tax purposes, since she's family and we haven't paid her more than $10k or so.  Is this okay?

To follow the letter of the law, your mother should be reporting her income and expenses related to watching your child.  A gift is a gift.  And paying her to watch your kid is paying her to watch your kid.  There is a difference.

I do not beleive you are required to provide her any tax forms.  It is up to her to report the income correctly and pay what she is supposed to pay.

[Deleted]

Jan 15, 2014 10:44:58 GMT -5 Firebird said:

3)  Unlicensed DCP #2 - our twice-weekly Babybirdsitter, ~1 day a week.  She is a SAHM buddy who has a son Babybird's age and watches her a couple times a week.  I have no idea if she watches other kids, but she averages $300-400/month watching ours.  I'd have to look at my records to see the exact total but it's well over $600. 

Similar to your mom, I do not beleive you need to provide the babysitter a 1099.  It is up to her to report her income properly on her taxes.

[Firebird]

Yeah, but a lot of families don't pay each other for daycare services so I think an argument could be made that the money we pay her is a "gratitude" gift rather than actual compensation.  (In reality, I consider it the latter.  But I also think rules should be different for family.) 

[Deleted]

Jan 15, 2014 11:21:35 GMT -5 Firebird said:

Yeah, but a lot of families don't pay each other for daycare services so I think an argument could be made that the money we pay her is a "gratitude" gift rather than actual compensation.  (In reality, I consider it the latter.  But I also think rules should be different for family.) 

An argument could be made, but if she were audited, the auditor would consider it income.

[Deleted]

uhm. I know letter of the law, the sahm should be paying taxes on that money. But that is something i really think you should have discussed with her FIRST. There is a good chance she does not plan on claiming it.  Most babysitters around here charge, and well, rightfully so, much more if they are claiming it. You might find her rates going up exponentially, or her opting out of the situation if you just hand her a 1099... which ultimately you cant really do anyway unless she volunteers you her Social, etc. .... 

[Firebird]

Oped, I'm planning to ask her if she intends to declare it before doing anything. But frankly, I think her rate is pretty fair. She gets $40/day for a half-day shift (about four hours). Mom and the licensed daycare providers get $50-55/day for a WHOLE day, which is about ten hours.

In other words, she makes about $10/hr while my mom and the pros make around $5/hr (for full days; my mom also gets $40/hr for half days). Her hourly rate is almost double theirs.

[Deleted]

I'm just warning you. In my experience that was always a conversation to be had at the beginning of the arrangement. I hope it turns out to be a non-issue. 

[Sam_2.0]

Good question. We have a similar arrangement with the college student and the SAHM mom that watch DD each two days a week. We've negotiated the rates with each of them and pay cash weekly. We don't claim it for the tax credit at all. So it's up to them at this point to claim the income and we don't have to give a 1099? We pay one $80/2 days (the college student, but she takes DD to her other job so she's working two at a time), and $50/2 days for the SAHM (what she quoted us). The college student does come to our house but she's not a live-in nanny.

[Firebird]

Jan 15, 2014 11:53:08 GMT -5 oped said:

I'm just warning you. In my experience that was always a conversation to be had at the beginning of the arrangement. I hope it turns out to be a non-issue. 

Agreed, that would have been ideal. Unfortunately, I didn't think of it at the time. Hopefully it'll work out.

[Deleted]

Jan 15, 2014 12:16:27 GMT -5 Firebird said:

Jan 15, 2014 11:53:08 GMT -5 oped said:

I'm just warning you. In my experience that was always a conversation to be had at the beginning of the arrangement. I hope it turns out to be a non-issue. 

Agreed, that would have been ideal. Unfortunately, I didn't think of it at the time. Hopefully it'll work out.

What are you going to talk to her about?   You don't owe her any tax forms.   It is up to her to file correctly.    If you were paying her cash and were going to start writing a check, you may want to ask, though.

[Rocky Mtn Saver]

I'm not sure I'd ever have a conversation about whether someone intends to not declare their income.  You don't know want to be involved in that at all.  I would suggest just letting them know whether or not you plan on claiming the Dependent and Child Care Credit using their SSN/TIN and leaving it at that.  Don't ask for knowledge of their intent to thwart tax law. 

[wvugurl26]

Jan 15, 2014 12:21:57 GMT -5 Rocky Mtn Saver said:

I'm not sure I'd ever have a conversation about whether someone intends to not declare their income.  You don't know want to be involved in that at all.  I would suggest just letting them know whether or not you plan on claiming the Dependent and Child Care Credit using their SSN/TIN and leaving it at that.  Don't ask for knowledge of their intent to thwart tax law. 

I understand not wanting that information but you can't really force them to give their SSN can you?

[Rocky Mtn Saver]

No, you can't force them but you can still use the info you have to claim the credit.  There's an IRS procedure for that.  I suspect it'd cause a red flag with the IRS for the person who won't provide their info.

Question: My babysitter refused to provide me with her social security number. Can I still claim the amount I paid her for childcare while I worked? If so, how do I claim these childcare expenses on my tax return?
Answer:
Yes, if you meet the other requirements to claim the child and dependent care credit, but are missing the social security number or other taxpayer identifying number of a provider, you can still claim the credit by demonstrating "due diligence" in attempting to secure this information.

•If a provider of childcare refuses to give a taxpayer the identifying information, the taxpayer can still claim the credit.
•The taxpayer must provide whatever information is available about the provider (such as name and address) on Form 2441 (PDF), Child and Dependent Care Expenses.
•The taxpayer should write "See Attached Statement" in the columns requesting the missing information.
•The attached statement should explain that the taxpayer requested the provider’s identifying number, but the provider did not give it to the taxpayer.
•This statement will support a claim of the use of due diligence in trying to secure the identifying information.


www.irs.gov/Help-&-Resources/Tools-&-FAQs/FAQs-for-Individuals/Frequently-Asked-Tax-Questions-&-Answers/Child-Care-Credit,-Other-Credits/Child-and-Dependent-Care-Credit-&-Flexible-Benefit-Plans/Child-and-Dependent-Care-Credit-&-Flexible-Benefit-Plans-3

[wvugurl26]

So in other words if she goes that route, you better be prepared to lose your childcare provider. Since she isn't claiming the credit for that provider it is less of an issue.

[Rocky Mtn Saver]

Jan 15, 2014 12:41:54 GMT -5 wvugurl26 said:

So in other words if she goes that route, you better be prepared to lose your childcare provider. Since she isn't claiming the credit for that provider it is less of an issue.

Possibly.  Which is why I'd tell the provider upfront if I intended to claim the credit using their info.  They can decide if that works for them or not and no one needs to go into detail.  That conversation does not give me any information about their tax filings that I don't want to know. 

[Firebird]

I don't care about claiming the credit. So can I just stay out of this? She can still declare the income from us if I don't give her a 1099?

Personally, I don't care if she files her taxes and I don't care if we can deduct what we paid her from our taxes. I didn't expect to be able to do that in the first place.

I'm only wondering what I need to provide her, legally.

[Deleted]

Fine, maybe I should have said the conversation up front should include whether or not the person purchasing daycare will be claiming it... Either way though, the conversation is the same. If Firebird is going to claim the credit, she is going to force the hand of the individual providing care. I'm not saying that individual shouldn't be claiming it anyway (or even that she isn't planning to)... but ultimately, that is a conversation i think best had at the beginning of the arrangement, and which, at this time, has the potential to cause issues in the relationship/agreement... Just so firebird is aware, which it seems that she is...

[Deleted]

Jan 15, 2014 13:02:50 GMT -5 Firebird said:

I don't care about claiming the credit. So can I just stay out of this? She can still declare the income from us if I don't give her a 1099?

Personally, I don't care if she files her taxes and I don't care if we can deduct what we paid her from our taxes. I didn't expect to be able to do that in the first place.

I'm only wondering what I need to provide her, legally.

Not only can she, she is required to.    You don't have to give her anything.

[Firebird]

So when is one REQUIRED to provide a 1099 to one's employee?

[Deleted]

Jan 15, 2014 13:20:39 GMT -5 Firebird said:

So when is one REQUIRED to provide a 1099 to one's employee?

Never.

[Rocky Mtn Saver]

Jan 15, 2014 13:22:07 GMT -5 ArchietheDragon said:

Jan 15, 2014 13:20:39 GMT -5 Firebird said:

So when is one REQUIRED to provide a 1099 to one's employee?

Never.

... because 1099's are for independent contractors, and W-2's are for employees.  Many people are confused about the difference, though, on both sides of the transaction. 

All employees receive a W-2.  Independent contractors who are paid more than $600 by a business receive a 1099 stating that.