Tax Question?

Question

What is the highest amount of income you can make and not have to claim on taxes??

I ask regarding childcare. How much can I pay my in-home provider and her not have to claim it?

Answer 1

Depends on how you want to treat the payments and whether you want the legal or illegal answer.

If you want the illegal answer and aren't going to claim the childcare credit, you can pay the person anything you want to pay them. You won't declare the payments to them, and they won't declare the income.

If you want the legal answer, $0 would be the maximum you can legally pay them and not have them claim it on taxes. By the person providing child care for you, they are being self-employed. Self-employment income should be reported on the tax return on a Schedule C along with any expenses incurred in earning the self-employment income. If the net income/expense from the self-employment is more than $400, then self-employment tax would be owed by the childcare person. Self-employment (SE) tax is 15.3% of 92.35% of net self-employment income.

What you could legally do is have the childcare provider tell you how much in expenses they had for the child care, and you reimburse them for those expenses. They have a net profit of $0, and therefore no tax effect, and you have childcare expenses for the amount you paid them (maximum of $3,000 for one child, and $6,000 for 2).

Answer 2

Up to $399 for the year, as long as she isn't already filing a return. If for example she's filing a joint return with her spouse, then she'd have to claim it from the first dollar.

But an in-home (if in YOUR home) child care provider would generally be a household employee, not an independent contractor. If so, then you would be required to deduct taxes from her pay, pay employer taxes, and give her a W-2 at the end of the year and report the w-2 info to the IRS. If it's in HER home, then she would be an independent contractor and be responsible for her own taxes.

Not the answer you wanted, I know - but that's how the law reads.

Answer 3

Too complicated for a simple answer. It involves what deductions she is claiming now, what kind of other income she is receiving, what expenses she claims to do either or her income producing activvity, so not enough info to correctly answer.

Answer 4

you could pay up to $10,000 and you both could claim it as a gift, but then you could not have any child care deductions.