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

[Firebird]

Oh, so you only have to provide 1099s if you're an actual business rather than an individual? That makes sense. Thanks for clarifying.

[Firebird]

I plan to tactfully inquire whether she plans to claim our income, since if she is doing it I'd like to take the tax deduction. If she claims the income, do we need a form from her stating how much it was to get the deduction? Or can they do it from our own records?

[Rocky Mtn Saver]

Jan 15, 2014 13:27:41 GMT -5 Firebird said:

I plan to tactfully inquire whether she plans to claim our income, since if she is doing it I'd like to take the tax deduction. If she claims the income, do we need a form from her stating how much it was to get the deduction? Or can they do it from our own records?

I would perhaps just suggest you ask her if it's okay if you use her SSN/TIN to claim the child care credit.  There's no need to ask for information you don't want to know. 

I believe you can use your own payment records to show how much you spent on child care, if she doesn't want to provide you a statement. 

[Firebird]

Good idea, Rocky I'll do that.

[Deleted]

Also, the amount you can claim is capped. So if you are already over that amount, it might not even matter.

[Sam_2.0]

Just to clarify: we pay our babysitters in cash. We don't claim the child care credit, so we don't need their SSNs. Whether or not the babysitters claim income is their own matter to handle, but I don't need to do anything else?

[Rocky Mtn Saver]

That appears to be correct, Sam.  When I made the comment originally, I was either (a) forgetting that we weren't talking about a business or (b) smoking crack.  You pick. 

[Sam_2.0]

LOL! I am just glad we've not been missing something that big! I thought for sure our CPA would have advised us of that since she knows about our arrangement and the fact that we don't claim the credit. Whew!

[mwcpa]

Actually, following the letter of the law, hiring a baby sitter in ones home is actually hiring an employee.... while IRS has not really gone after this issue, if you plan to run for Congress, get a judgeship, be in a high powered position or be under the public eye you may want to make sure you do it correct....

www.irs.gov/pub/irs-pdf/p926.pdf

www.irs.gov/taxtopics/tc756.html

www.cnbc.com/id/100579328

www.nytimes.com/2009/01/24/your-money/taxes/24money.html?pagewanted=all&_r=0

Zoe Baird did not become the US Attorney General over this issue....

and now there is an issue with India over this matter.... articles.timesofindia.indiatimes.com/2013-12-14/india/45189840_1_indian-diplomats-new-york-prabhu-dayal-domestic-help

Be advised....

[DVM gone riding]

see and I thought a lot of individuals got in trouble for not providing their domestic help 1099's?? Shoot if MWCPA doesn't weigh in I am going to have to look it up just to try and understand and I don't come close to paying anyone anywhere close to $600

eta: sorry I was stuck on the first page and didn't realize he had weighed in!! Thanks for the clarification. That is what I thought--if you higher them in your house you are responsible for treating them like an employee

[DVM gone riding]

I thought the third link was the most helpful in terms of simple language. So in the OP's situation the babysitter that takes babybird and watches her in her own home along with other children could be considered independent and given a 1099?? But if she is watching over her inside Firebirds house then she is a nanny and needs a w-2 withholding employer matching funds etc.?

[mwcpa]

Employee and independent contractor status are generally determined by various control factors.  If the worker works in your establishment, using your tools, must report at a certain time, etc they are more than likely an employee.  If you hire someone who does the work on their own, with their own tools, in their own space they are probably more independent.

[Firebird]

I'm confused again...

[Deleted]

Jan 16, 2014 10:03:41 GMT -5 Firebird said:

I'm confused again...

MWCPA is saying that to actually follow the letter of the law, your mother and your babysitter are your employee and you should be remitting their payroll taxes and giving them W-2s.


EDIT:  your mother is exempt, unless you are unmarried.     Strange rule if you ask me.

[Firebird]

But my babysitter doesn't watch Babybird in my house - she watches Babybird in her house. 

My mom switches back and forth but she primarily watches Babybird in her own house also. 

[Deleted]

Jan 16, 2014 11:31:20 GMT -5 Firebird said:

But my babysitter doesn't watch Babybird in my house - she watches Babybird in her house. 

My mom switches back and forth but she primarily watches Babybird in her own house also. 

That might make her a contractor.  Does she watch other kids, too?

[Rocky Mtn Saver]

www.irs.gov/pub/irs-pdf/p926.pdf


Do You Have a Household Employee?
You have a household employee if you hired someone to do household work and that worker is your employee. The worker is your employee if you can control not only what work is done, but how it is done. If the worker is your em-ployee, it does not matter whether the work is full time or part time or that you hired the worker through an agency or from a list provided by an agency or association. It also does not matter whether you pay the worker on an hourly, daily, or weekly basis, or by the job.

Example. You pay Betty Shore to babysit your child and do light housework 4 days a week in your home. Betty follows your specific instructions about household and child care duties. You provide the household equipment and supplies that Betty needs to do her work. Betty is your household employee.Household work. Household work is work done in or around your home.

Some examples of workers who do household work are:
Babysitters,
Caretakers,
House cleaning workers,
Domestic workers,
Page 2 Publication 926 (2014)
Drivers,
Health aides,
Housekeepers,
Maids,
Nannies,
Private nurses, and
Yard workers.

Workers who are not your employees. If only the worker can control how the work is done, the worker is not
your employee but is self-employed. A self-employed worker usually provides his or her own tools and offers
services to the general public in an independent business. A worker who performs child care services for you in
his or her home generally is not your employee. If an agency provides the worker and controls what
work is done and how it is done, the worker is not your employee.

Example. You made an agreement with John Peters to care for your lawn. John runs a lawn care business and
offers his services to the general public. He provides his own tools and supplies, and he hires and pays any helpers he needs. Neither John nor his helpers are your household employees. More information. More information about who is an employee is in Publication 15-A

[Sam_2.0]

Well, our babysitter comes to our house. But then she takes DD to her other job or back to her house to watch her siblings too half of the time. So she's kind of a half-contractor half-employee?

[taxref]

As a summary, allow me to just give a quick rundown of the rules regarding this situation.  This doesn't go into all the details, but it may help sort out some of the issues.

1. A 1099 is not involved.

2. If a babysitter works in her own home, she is an independent contractor.  As a day care provider, at the end of the year she is required to give each family she provided daycare services a letter.  That letter must state her name, address, taxpayer ID number (her SSN or EIN), and the amount received from the parents for day day services in that year.

That day care provider is to report her day care income on Schedule C.

3. If the babysitter works in the parent's home, she is a household employee.  The parents must give her a W-2 at the end of the year.  The parents also report the babysitter's income to the IRS, using Schedule H.  Schedule H is filed with the parent's tax return.

That domestic employee is required to report her wages on her tax return. 

Also note that if the household employee made enough money, the parents might be required to have workers compensation insurance, and pay into state unemployment.  Check with the state government about that.

4. Treating payments in return for services as a gift is contrary to law.  

[mwcpa]

tax ref's post

[Sum Dum Gai]

Every time I read a tax thread I think we need to scrap the whole system and do that fairtax thing.  Taxing income is a giant pain in the ass.

[mwcpa]

And a national sales tax will be the same..... Someone like the dreaded irs will administer it and people (and corporations) will look for ways to skirt the law.... And Congress will tinker with it and make it a mess also..... 

[Sum Dum Gai]

How much can you really tinker with sales tax though?  Companies can under report their sales to lower their tax bite.  Individuals don't really have a choice in sales tax though.  It's charged automatically when you buy stuff.

[Deleted]

Jan 17, 2014 13:48:47 GMT -5 Sum Dum Gai said:

How much can you really tinker with sales tax though?  Companies can under report their sales to lower their tax bite.  Individuals don't really have a choice in sales tax though.  It's charged automatically when you buy stuff.

What about buying stuff online directly from China? 

If a national sales tax was 25% I can assure you that American companies would be setting up overseas subsidiaries to do just that.   What jurisdiction does the IRS have for collecting sales tax from a Chinese company?  Then it would be up to the individual to remit the sale tax they owe on what they buy.   And, except for an audit, that would be very hard for the IRS to track down.

[Sum Dum Gai]

What about buying stuff online directly from China?

The shipping will kill you.  Unless you buy enough to fill a container, and have the know how to get it through a port inspection and whatnot.  If your container goes missing on the docks and gets sold in the huge open air markets in LA you have no recourse whatsoever.

But sure, we'll pretend that's easier than scamming our income tax system   

[Deleted]

Jan 17, 2014 13:58:46 GMT -5 Sum Dum Gai said:

What about buying stuff online directly from China?

The shipping will kill you.  Unless you buy enough to fill a container, and have the know how to get it through a port inspection and whatnot.  If your container goes missing on the docks and gets sold in the huge open air markets in LA you have no recourse whatsoever.

But sure, we'll pretend that's easier than scamming our income tax system   

I ordered eyeglasses online from a company in China.  i didn't go through any of the stuff you talked about.  They cost me $39.  If I went to my optometrist glasses would cost my $150.

I think you underestimate people's desire to save a buck, especially if they are screwing the IRS.    

Case in point, your uncles willingness to buy hot sauce through your company to try and get a wholesale price.   People like to figure out ways to save money.

[Sum Dum Gai]

Case in point, your uncles willingness to buy hot sauce through your company to try and get a wholesale price. People like to figure out ways to save money.

Right, but he's still paying sales tax on the purchase.  I owe sales tax or use tax on everything that flows out of the business.  If I sell it the state wants their piece.  If I use it within the company, I owe use tax on it.

During an audit it's pretty easy to figure out whether or not I have the inventory I say I do.  If things are missing they're going to assume they're sitting in my garage, and charge me use tax on them, plus fines.  Scamming income taxes is way easier.  Just get paid in cash.  Leaves no paper trail.  Even if you are audited, they probably won't catch it.

[Deleted]

Jan 17, 2014 14:11:33 GMT -5 Sum Dum Gai said:

Case in point, your uncles willingness to buy hot sauce through your company to try and get a wholesale price. People like to figure out ways to save money.

Right, but he's still paying sales tax on the purchase.  I owe sales tax or use tax on everything that flows out of the business.  If I sell it the state wants their piece.  If I use it within the company, I owe use tax on it.

During an audit it's pretty easy to figure out whether or not I have the inventory I say I do.  If things are missing they're going to assume they're sitting in my garage, and charge me use tax on them, plus fines.  Scamming income taxes is way easier.  Just get paid in cash.  Leaves no paper trail.  Even if you are audited, they probably won't catch it.

The state has jurisdiction over you.   If you set up a company in China, the state would have no jurisdiction over you.


I do agree with you, though, that a national sales tax would be simpler and simpler means less loop holes.   My point is just that any rule that is set can be thwarted by smart people.

[Sum Dum Gai]

I believe the fair tax included provisions to put tariffs on imported products to keep them on par with domestic products including the sales tax, but I haven't read anything on it in ages.  People could still smuggle your Chinese glasses in, but that's one hell of a long smuggling route.  I'm thinking the up charge is going to be higher than just paying the tariff or sales tax.

[mwcpa]

who has ever been offered from the local plumber to pay cash and he would not charge sales tax... do not tell me this would happen less if a fair tax was put into place...

when there is a rule, regulation, law, etc, within 3 minutes of its start someone has figured out a way to beat it or cheat it and Congress has drafted an amendment to exempt themselves...