If Im caring for a child at home for small $$ must I claim this as income on my taxes? Can the parents claim?

Question

I am caring for a child in my home for $300/month. Must I claim the income on my taxes? If I don't, can the parents still claim the payments as childcare expenses?

Answer 1

If the parents claim daycare (you) on their taxes then yes you have to claim it on yours. In order for them to do that they need your name and social. When they claim daycare on their taxes they have a chance of getting some money back. Sit them down and talk to them and see what they plan on doing.

Answer 2

Income is Income to the IRS. $300 may be small to you, but to the IRS it is income.

Your expenses should wipe out any tax obligation if this is your only income, but you must claim it. Talk to a tax person and find out what expenses can be claimed.

Don't every try to evade paying taxes. Believe me, living in your own home and sleeping in your own bed beats sleeping at the Hotel Federal every night behind bars. And the food is a whole lot better.

Answer 3

The parents CAN claim childcare expenses on THEIR tax return REGARDLESS of whether you claim the $300/month on your return. The IRS will then expect to see that money appear as income on YOUR tax return.

In order for the parents to claim childcare expenses they must file Form 2441. If they electronically file they will need your SSN (or the EIN if you run an actual daycare center) to put on the form. They CAN file without your SSN, but will have to do so by traditional paper filing.

You may be tempted to withhold your SSN from them to avoid having to claim the income on your return, but I strongly advise against it. Like I said they can still file a paper return, and if it is not reported on your tax return the IRS will come after you for back taxes, filing a false return, and then apply penalties and interest.

You have to file a Schedule-C showing the $300/month income. If you have set up your home as a formal daycare then you should be familiar with this form and have been keeping track of all your buisness related expenses.

If your childcare service is basically traditional babysitting, you can file a Schedule C-EZ to report the income.

You must also file a Schedule SE (Self Employment Tax) along with the Schedule-C (or C-EZ) with your tax return.

Since there is still plenty of time before April when you need to file your taxes, I advise you to save up some money before you file, since you have no income tax withholdings for the money you're making. You'll need to set aside 15% of what you were paid, at the $300 rate you mention, that means setting aside $45/month. If you are going to be paid for all 12 months of 2007, then you need to have (45 x 12) $540 by the time you file.

Yes, it sounds like a lot, but you'll need this money just in case you don't have enough tax credits to offset the increase in tax liability.

You may think that reporting the income on the Schedule-C is a hastle, but there two things you need to consider before not reporting it...

1) You are requiered by law to report all of your income and the IRS can cause all sorts of misery for people that file false tax returns and fail to pay their taxes.

2) If you are in the lower range of income to begin with, any income reported on Schedule-C (or C-EZ) counts as earned income. This means that if you are eligeble for EIC (Earned Income Credit) you will recieve more EIC than if you didn't report it.

Answer 4

You should claim the income but if you don't, the parents can not claim the payments as childcare expenses. In order for them to claim the payments, they would need your social security number to input on their tax form and if they do that, you would have to claim the income on your tax form. If you decide to claim it, if you don't want to give out your SSN, you can get an EIN (Employer Identification Number) from the IRS and give that to the parents instead. This would protect you from identity theft.

Answer 5

Yes you are required to claim it. If they claim it on their return as childcare expenses, but you don't claim it as income, the IRS will be asking you why, and then you'll have to redo your return, pay the taxes and also pay interest and penalties.

Answer 6

Yes you must claim it. The parents can take a credit for it, which is 20% of the expense, limited to $3,000, equalling a total credit of $600. Perhaps you can ask them to claim only $3,000 of the $3,600? You do need to provide them your ss# or tax id. If you don't claim it, and they do, you could get into trouble with the IRS.

Answer 7

You have a social security number, right? Do you have a permit to do it or you are woking under the table?

If your parents will include this in their tax - this will be their extra income, not your's.

The thing is, your clients might be including this on their tax, and everything should be working hand in hand - so there will be no problem.

Answer 8

You are required by law to provide your social security number to anyone that you provide child care to. Failure to do so will result in a penalty of $50 to you for each time you fail to provide it. below is a link to for W-9. For W-10 is specifically for daycare providers.

http://www.irs.gov/pub/irs-pdf/fw9.pdf

Answer 9

yes, you have to claim the income(there are deductions) and yes the parents can clain childcare expences even if you dont(they report you to the IRS)

Answer 10

yes you do have to report it but it depends on how much you made so keep good track of your salary. The parents can claim this on their taxes as well that is why you should keep track of how much you made and claim it on yours and more importantly do not give them our social security number.