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Baby Sitting money and Taxes

post #1 of 31
Thread Starter 
So I have a question am I required to claim income on my taxes from baby sitting?

Here is the deal I made $400 for watching my nephew. My SIL pays me a whole $12.50 a day. I get a little extra she gets dirt cheep day care.
If I claim it we loose $60 off our refund and my SIL claiming it as a child care expence can recieve $82.

I really don't want to loose $60 thats a weeks worth of groceries for my family and thats how I think of it. She naturally wants the $82. She is unreceptive to the idea of giving us any of the money we would loose.

I have looked for the past hour for information on this. I know some of you watch other children for a little extra money. How do you handle taxes?
post #2 of 31
Technically you're supposed to claim ALL the income you receive, from any source. Your sister isn't required to give you a 1099 until she pays you over $600. If she claims the childcare credit and lists your social security number as the provider, you WILL be audited to see if you paid tax on that income. Not only do you pay income tax, but you also pay self employment taxes.

Here is what I'd do ... I'd let sis take the childcare credit. I'd re-calculate my taxes based on the 'business' income. I'd make sure I took every conceivable deduction for running the business that I could think of, short of using the one that deducts a portion of my house. The deductions might make claiming the income worthwhile. Last year I had two businesses - Avon and my teleservices job. It turned out the little bit of income I got from Avon helped A LOT because I was able to deduct so many expenses. It was so helpful it made it so I paid virtually no taxes on my teleservices job. With this in mind, you might come out WAY ahead on the deal - more so than your sister has to gain.
post #3 of 31
Thread Starter 
Thanks for the tip So she has only paid me $400 so I won't need a 1099. My state doesn't require a day care liciense if you are watching family. I could deduct Auto Expences because we go places and do things during the day, My computer that I use to research activities, the snacks I buy for him and since it is a child care thing I could do part of my house. Running the numbers increased my over all refund by $60. Wow I am surprised.

Still if anyone else has done this. I would love advice and tips. Anything out of the norm on taxes always makes me a little nervous
post #4 of 31
Personally, I wouldnt give her your ss #. And its sad to think she wants to claim the deduction since you are family and she is getting off beyond dirt cheap for you to watch her child in the first place. I would be careful using part of your house for child care expenses. That can get tricky upon an audit since you only use a portion of the house a percentage of the time.

JMO. This is why doing things we think are helpful for family sometimes turns into headaches we dont need.
post #5 of 31
If it were me, tell her that she can clain it as you are, and cut your losses. BUT, tell her that you are going to have to be required to raise your prices since she is claiming it and you are having to pay taxes now. She may agree this year to NOT claim it in order to not have to pay a higher price.
post #6 of 31
Well, it sounds like you're both getting out ahead since your tax refund increases by taking the extra deductions, so I'd leave things as they are. Why cause problems by demanding more money?

I do agree about the house deduction because from what I've heard, you have to have one area dedicted to nothing but your business and they will audit you quicker if you claim this type deduction. I'd check into that more before claiming it.
post #7 of 31
When I did in-home day care years ago, our accountant told us if you make $500 or more in a year on it, you have to claim it. He told me the best thing to do would be to take a little out of what I made each week and hold it back so when it came tax time, if it ended up that I would owe, I had it.
post #8 of 31
Thread Starter 
Yeah, things have really hit the fan. So I am not going to be watching my Nephew anymore. She is going to get me the Last $100 she owes from January and that's it. She pretty much called my DH selfish and me a snob. My DH finally stood up to her and straight out told her that SHE is responsible for her own life and SHE is the reason she is miserable, and SHE is the reason they have no money, and to stop buying stuff they don't need. He stood up for me that I have been nothing but nice to her. So we will see if her other SIL will watch my Nephew and that's it.

Too much Drama for me personally. Family and money really just shouldn't mix.

As I am made only $370 this last year from watching him, I am least shouldn't have to pay other taxes on it.
post #9 of 31
Wow, bummer that it ended on such a sour note! Sorry to hear that.
post #10 of 31
I agree! If she wants to claim this then you need to raise your rates or trade services or something! If she were going to a day care she could claim it and would be paying a heck of a lot more. When I was in highschool I had someone do this to me. I know you are supposed to claim every penny but at 15 I was making like $1.5/hour. If I had to claim taxes it would have been like making .70/hour. That is just not fair!!
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