February 20, 2008,
D.J. asks from Crown Point, IN on February 17, 2008
Need Help with Tax Question for Providing Child Care.
Do I have to claim the money I get for babysitting on my taxes? I have never had to do this before and I have a parent who wants my ss# for her taxes. Is this something I have to do? How does it effect me if she claims child care on her taxes? Someone had said if you make over a certain amount then you have to claim the money you make on your taxes. I'm not quite sure how this works and every time I call someone for help I receive different answers. Thanks in advance!
L.M. answers from Chicago on February 19, 2008
Leagally you should be reporting all of you income. If the person uses you SS# you most diffenatly have to report it if you don't then you could be audited and pay penatlies and fees. The person that you providing the care for will use this as deduction on their taxes.
I hope this helps
J.W. answers from Chicago on February 19, 2008
I can answer this from a licensed day care provider viewpoint only. I must claim my income. Each year, I give each parent a printout of all of their payments along with my ssn for their filing of taxes. Know if they claim you and you fail to claim income, this sends a red flag up to the IRS. If you are providing care for more than one family, I believe that you can no longer claim "License Exempt" and are now operating a daycare without a licensed and can be charged with a crime. To find out the exact guidelines, I recommend contacting DCFS in Glen Ellyn at ###-###-####. Ask to speak with Debbie McElvy, she is the local rep and is very helpful. The response below mine suggests that the state collects/charges some type of fee to daycares. I've been doing this for almost 16 years and have NEVER paid any type of fee to anyone!
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C.L. answers from Chicago on February 19, 2008
Technically, yes, you are supposed to claim the income. I watch a couple of kids as well, and i set the rules before hand that I didn't plan to claim the $, so it was agreed upon beforehand. since I don't make much money at all at this, I may not be required to anyway, but i wanted to set the ground rules. Parents who work get a nice tax break if they show they've paid a sitter, so it is nice for them to claim it. I've been on both sides of this coin!
C.O. answers from Chicago on February 18, 2008
If you make over $600.00 a year you need to pay taxes. This is the law not a choice. My daughter makes mim. wage and she pays taxes. Just because you are self employed does not excuse you from paying taxes. I also run a family daycare and would never think about not paying taxes. Just because we are in a lower paying profession does not excuse us from paying our share of taxes. We use the schools, roads, military etc.. just like everyone else. It always bothers me how some people think they can choose if they would like to follow the law or not. I am not meaning this is you. I am responding to some of the other responses. I think it is great that you are trying to get the right information. Google Red Leaf Press and they should have some resources to help you out. I also believe you may be able to find a tax person through them but I am not sure. My husband has extra taxes taken out of his check every week so we are not hit with a big tax bill at the end of every year. There are alot of things you can write off such as toys, food etc. but you will need to keep receipts and record of the meals you feed the daycare children.
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J.I. answers from Chicago on February 19, 2008
If they are going to put your ss# on their tax return, then you will definitely have to claim it as income, because the IRS will link the number & try to match it, and probably one or both of you would get notices from the IRS that it's not matching. I believe, technically, that you are always SUPPOSED to claim all of your income. The limit of $600 for the year comes in from a business paying it out - if a business pays out $600 or more to an independent contractor, then they are required to send out a 1099 form at year-end. Again, IRS will do matching. Under $600 they don't HAVE to send out the form, but some do anyway. Person should still technically claim the income either way. - Hope this helps!
W.L. answers from Chicago on February 19, 2008
Without question, yes you have to claim babysitting on your taxes (by law you must claim all income regardless of how much you make); yes you must provide your SS# to the taxpayer in which you babysit for; and yes it will effect you if she claims child care on her taxes and you do not claim that income. For your tax return, you can either claim that income under your own SS# (and then you will be taxed on that income accordingly) or you can apply for a personal tax ID # (simple, free and safer than handing out your SS#) and file and additional tax form for a small business. If you do this you have the ability to write off certain expenses which would then lower your actual income, thus lowering your taxes owed. I would highly recommed you have an accountant (one who is a CPA) do your taxes as they will be able to guide you in which way offers you the least amount of tax owed. I work for a guy who is really good at what he does (he is both a CPA and a Certified Financial Planner) and he is really reasonably priced. He is located in Orland Park but if that is not convenient he does phone consultations and then you can either fax or mail him all your information. He will file electronically for you, you can pay by credit card and then he will mail everything back (very convenient but if you choose not to use him definately use someone). If you wish to contact my boss his name is Telly Makris and he can be reached at ###-###-#### (he owns an accounting company and a wealth management company). Tell him I refered you and he will give you a discount on any work that he does. Thanks and Good Luck! Lynn F.
M.D. answers from Chicago on February 18, 2008
I see that you have received alot of helpful info. I am a licensed childcare provider, and just thought I would foward this information to you. It is best to discuss all financial matters before hand. Unless you have a written agreement that you will not be giving out your tax i.d/ss# you technically owe that information. By law if you are collecting money it is your responsibility to report that to the I.R.S. I am not sure what accountant would tell a provider not to claim such information, for tax reasons that person is at great risk for audits & fees regardless of the dollar amount on tuition fees. My fees are solely based on my care including tuition, food, activities, field trips etc. I network with a lot of providers, and one provider withheld her information because a parent walked out without a two week notice/payment. From what I understand the family called IRS and put in a complaint stating that the provider withheld the information... long story short they were able to obtain a tax i.d. So please be careful. Good luck in this matter. I hope that it is resolved quickly!
D.Y. answers from Chicago on February 19, 2008
you say you are a childcare provider? are you licensed?
did the mom when she hired you understood it was a cash job?
do you know how much you made off of her last year? do you have a EIN #? If you need more answer please e-mail me personally. ____@____.com
S.C. answers from Chicago on February 19, 2008
I believe it's over $600.00 a year and "yes" you have to report it as income you will of course have to pay the taxes on it.
Contact me off line for more details. ____@____.com
S.G. answers from Chicago on February 19, 2008
Yes, you have to provide her with that information. If you haven't already, you should apply for a EIN# Employee Identification Number from the internal revenues office, opposed to giving out your ss#. They are paying for you for a service and they have every right to be able to write it off on their taxes, just like you have to right to claim everything or almost everything that you buy for your daycare -- food, learning items, a part of your utilities, rent etc.. you have to find the right tax preparer.
J.M. answers from Bloomington on February 19, 2008
The 1st thing you should do is talk to an accountant. If you claim your income, you can also take deductions for using your home for your business. There are rules and regs for what can and cannot be done and your accountant can fill you in on those specifics. The other thing you may need to look at is charging more. If you claim it as income, you then also have to pay income taxes. Your cost of providing them care has just gone up. Also, in keeping records and paying an accountant, your personal costs have gone up. Again, an accountant can fill you in on the percentages and requirements. Staying at home with your children is your priority as it should be! Bringing in some income to assist yor family is great, but make sure it doesn't loose you money in the long run!!! Have a great week! Love those babies and keep smiling!