Babysitting; State Pay; & Tax Question.. I'm confused...?

Question

I am babysitting children for a lady who posted an add in the newpaper. She pays me about $150 a week with a personal check or cash. Well i was wondering if whether i accept state pay or not, do i have to pay taxes at the end of the year? How does this work? Also, can she claim the money she is paying me for babysitting at the end of the year, and how would this effect me, if it even would? I am really confused.

Thanks.

Answer 1

That's taxable income to you. If you are providing the service in your home, you are self employed and must file a return if you earn more than $400 in any tax year. If you are providing the service in her home, you are a household employee and she should be withholding and paying in Social Security and Medicare tax. Optionally she may withhold income taxes if you wish but that is not mandatory, at least not yet. In any event, if your income exceeds the filing requirement amount for your filing status you must file a return and pay any taxes due.

Answer 2

You babysitting income is considered as taxable income (whether you file as self-employed, or the household employment). The Federal, State tax agencies are trying to tax on every dollar income you earned. The tax are computed on the amount reported on the form 1099. If your employer withholds taxes, or, reports the money paid to you as their expense, you definitely need to file income tax return at the year end, before 4/15/xx (once your income exceed $400/year mark).
However, if the parent of the childrens gave you small money all in cash, they do not report anything on their income tax returns, and once you receive the cash, you bought your baby
food, or supplies in cash. It is a wash transaction. No records can be traced! Your baby ate all those foods already.
The tax authorities will have a hard time to collect these taxes.
The two coments are just the rules of tax laws. What I am saying is a reflection of a different side of a coin - the "reality" - the real world.... What they are saying is for the well established company, a large day care center, a babysitting operation taking care of many childrens, a lot of revenues. Of course, the government agencies have to collect the taxes. But if your operation is so small, or just a short term, only small cash money change hands, I say your case is different.. Many flea market vendors, they set up stands for two weeks, every thansaction is cash basis, no receipts whatsoever. I do not believe the IRS can zoom in on the millions of poor flea marketer. You got a similar case. Remember, once you got paid by a check, report to IRS, your operation is a long-term business, then, you must pay taxes! Your employer reported you already. If the employer withhold P/R taxes (FICA) for you, you will get some money back when you retire after you reach - may be 67 (I know you are very young). You worry about now how to feed your baby!
This answers is from a different perspective. When you see all answers, I am sure you can find a smart, proper way to go. Good Luck!
By the way, not all CPAs want you to pay tax right away. They want you to pay tax properly. That is why you find tax accountant. Not all lawyers want to put you in jail, they defend their clients!

Answer 3

You are legally required to claim the amount she pays you as income, whether you accept state pay (is the state going to pay some of her child care expenses?), or whether she claims it on her tax return as child care expenses or not. If she claims it on her tax return, she'll ask you for your social security number so she can note that on her return, and you are required to give it to her.

Youi need to keep good records of your income and of any associated expenses.

You'll show the income and any associated deductible expenses on a schedule C or C-EZ, and use a schedule SE to calculate self-employment tax (social security and medicare). The numbers from the bottom of the two schedules will transfer to your 1040.