Do I have to pay taxes on what I get paid for watching my friends child?

Question

I watch my friends 2yr old 5 days week 10 hrs or more a day..she pays me $80.00 a week for this and deducts for days she misses and holidays. The average daycare around here is between $105 to $120 a week. So recently I told her in couple weeks I was gonna change it to $90 a week and that she would have to pay whether or not she comes or if there was a holiday. And her reaction to this was "Well if I have to pay every week then I want to claim this on my taxes so I get a deduction." So I would like to know what I would have to pay on my taxes to do this?...or how do I file this the end of the year and what do I have to do? And more importantly is it worth watching her anymore?? Thanks

Answer 1

If she's going to file it on her return then yes you have to file it on your return also (although you should be claiming it regardless). She won't get to claim all of it though. It's based on your income and the most she can claim is $3000.00 if she's in the lowest bracket. I know one year we paid $12,500.00 in child care. We were only allowed to claim $3000.00 per child on the form (we had 2) and then because of our income only 20% of that. It ended up we only got a $1,200.00 credit for our return.
It would be worth it,if you claim deductions. Keep track of mileage when you go to the store. If you provide food for her child a percentage of your grocery bill is deductible along with some house utilities. Call an accountant for a list of what is deductible for home childcare providers. By the end of the year you may break even in the governments eyes and not owe any taxes.

Answer 2

Having grandchildren I would say that in reality children are the only thing worth watching anymore. You can file a 1040 Sch C with your return listing the amount you gross from childcare. On the Sch C you can also list your expenses relating thereto; especially form 8829; which is business use of your house; where you get a percentage deducted for rent, utilities and anything else connected to maintaining your home. On the sch C you can also deduct for food and other items. By the time you get to the bottom line you will probably have nothing that is taxable. Go to IRS.GOV; upper right hand corner under forms; then you can download the form 1040, Sch C and form 8829 for 2005 if you want to practice or do a "show & tell".

Answer 3

Yes you have to pay taxes when you babysit. I've been doing it for 10 years now. Just go to H&R Block. They'll help you. Keep track of every thing you buy for her too. It helps if you write down how many meals she eats at your house, if you take her to McDonalds or something, keep the receipt, anything you might spend on her, save the receipt. You will also get a deduction for water and electricity. I do it because I love kids. I usually come out even after the taxes are figured.

Answer 4

I am not sure where you live. I believe you are either a American or Canadian. Your income is taxable as far as I know in either countries. If she doesn't calim that as an expense, you may be able to get away with it. Legally, you should file a income tax return at the end of the year and declare it as income.
I am not sure what your personal examption is. Your income is very low. You do not have to pay much income tax. Talk to an accountant. He could explain it to you.

Answer 5

Taxes are to be paid on any income earned. In your case you would be considered self-emploed & depending on your state of residence, there is the question of what regulations govern a child care provider. As far as your friend is concerned, the tax credit she would recieve is approximatley 15-20% of what she is paying you. Also take into consideration, are you doing this as a favor or as a business. The answer that you need is more indepth than I care to answer at this time. I am a tax accountant & can answer most of your questions if you desire.

Answer 6

You should be including this income on your tax return already. In order for your friend to get a credit for these payments, she'll have to file Form 2441 with her tax return. On this form she'll need to show how much she paid for your services, and she'll need to include your social security number. Once the IRS gets your social security number, they'll check your return to make sure your reported the income.

If you have a kid of your own that you are watching, and are just watching this other kid to get some extra money, I'd probably still watch the other kid. If this is your sole job, dump the kid and get a real job.

Answer 7

Legally, you're supposed to have been paying taxes all along on this money. If your friend starts claiming it off her taxes, then depending on what your arrangement is, she'll have to pay half of the social security for your earnings, and you'll have to pay the other half plus normal income taxes, or you'll have to pay all the social security.. The social security total will be 15.3% of the gross. Your income taxes will depend on what other income you (and your spouse, if applicable) have. Then there might be state and local taxes, depending on where you live.


Only you can decide if it's still worth watching her.

Answer 8

You are supposed to claim it anyways. But if she claims the deduction, you will have to claim the income, otherwise you will get audited and likely fined or a 90 jail term for tax fraud.

Answer 9

Yes - if she decides to claim this as a deduction you will have to file what you earn as additional income on your tax-return.

Answer 10

you have to claim what she pays you as earned income. She can rightfully use child care on her taxes and she should to save herself some money. But she should understand that she will pay alot more money if she has to go some where else. talk with her and talk with each other and each of you understand what both of you are thinking.