you have to declare your income.
Your tax level will depend on if you have other income also.
an honest citizen would pay their taxes
2007-04-22 23:17:01
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answer #1
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answered by D.W.W. 4
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Yes, you need to report it and pay taxes on it if the total you receive for the year is over $400, and it sounds like it already is. If you have other income also, either your own or you're filing a joint return with a spouse who has income, you'd have to report it from the first dollar.
You might or might not get a 1099 from the department of human services for the amount you're paid. Whether you do or not, the way you report the income for taxes is the same: you'll fill out a schedule C-EZ showing the income and any related expenses that you have for the babysitting (eg feeding the child, any equipment you need to buy), then the number from the bottom of that schedule will transfer to a schedule SE to calculate your self-employment tax (for social security and medicare). The numbers from the bottom of both of these schedules will then transfer to a form 1040 to calculate your total tax.
If that's your only income for the year, you won't owe income tax. But you will owe 15.3% of the net on the schedule C-EZ in self-employment tax. If you have minimal deductible expenses, that would be around $90 for each $600 you take in - if you get that much January through August, would be around $720.
2007-04-23 09:32:16
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answer #2
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answered by Judy 7
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You must file a tax return and pay any tax due if you have $400 or more in Self Employment income in any tax year. At the rate you're being paid, you've already exceeded that.
The Self Employment tax rate is 15.3% of net income, not 25% as the self-professed "Certified Tax Preparer" above noted. (Certified by whom? Where do they come up with that moniker? But that's another question entirely.)
If this is your only income your Self Employment tax alone may be over $1,100 for 2007. As such, you'll need to make quarterly estimated tax payments using Form 1040ES. You're already late on the first payment, it was due on April 17th. 3 more payments are due, on 6/15/2007, 9/17/2007, and 1/15/2008. If this is your only income that's all the tax you'll pay unless you can be claimed as a dependent by another taxpayer. Download the Form 1040ES package from the IRS website. It has worksheets to help you estimate your tax liability and calculate your quarterly payments.
When you file your tax return next year you'll attach Schedule C or C-EZ to your Form 1040 return to claim the business income and account for any business expenses. Meals you provide for the child, diapers, etc. are all legitimate business expenses. Since your net profit is over $400, you'll also attach Schedule SE to calculate the Self Employment tax. You'll then take a credit for the estimated taxes paid and either make a final payment to the IRS or get a refund of any overpayment, as appropriate.
If you stop babysitting in August and don't earn any other income you can probably skip the January estimated payment but you should still make the September payment to avoid a negative balance at tax time next April.
The advice here assumes that you are a single taxpayer, are not the dependent of another tax payer, and this is your only source of income. If you are married filing a joint return your estimated taxes will be higher. If you can be claimed as a dependent by another taxpayer, your estimated taxes will be higher. If you have another job, your estimated taxes will be higher. If you are over 25 or are any age and have dependent children you may be eligible to claim the Earned Income Tax Credit based upon this income. That will affect your tax bill in your favor if you are eligible to claim it.
2007-04-23 07:27:02
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answer #3
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answered by Bostonian In MO 7
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File form SE. Self-Employment tax. Yes, you will have to pay tax on this income and declare in on your 1040.
2007-04-23 06:21:56
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answer #4
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answered by suesysgoddess 6
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Good morning, yes you will need to file a tax return, here's why.
The monies she is giving you for the service is tax deductible to her so the IRS will know you are receiving payments from when she files her taxes. The monies you get from her are income to you, and it is self employment income which is subject to a SE tax of apprrox 25%. You will need to keep a log of all of the payments she gives to you as proof of the income.
Now to reduce the amount of SE tax you will pay, here's what you need to do each month.
1 If you have expenses related to this business ie picking up her kid, buying supplies etc, these things are tax deductible to you.
2 Keep a log of all expenses
3. each month subtract the expense amount from the actual monies received amount, and this will be the figure you will need to pay taxes on
The IrS will expect you to file quarterly to keep you from owing a large figure at the end of the year.
If you're real good at documenting your expenses, you can reasonably write approx 50% of what you receive as income from her.
Certified Tax Preparer
2007-04-23 06:56:47
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answer #5
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answered by Justheretohelp 3
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