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02/19/2011

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Joan Mrkvicka

Hi Tom, My husband has been out of work for two years, and has been helping me (under deress!) with the day care. From this article I gather I should not pay him(or not have paid him in 2010)so he shows no income, and I do not have any expense for him working with me. My next question, my 22 yo. daughter is coming to work for me this summer (she is 4th year teaching degree) She will probably work full time with me, but I should not pay her to work, and she can not claim any monies that I "gift" to her. Is that correct? What if her college freind also works for me. Can she be a "volunteer" and I "gift" to her through out the summer also, as long as she does not claim it on her taxes??
Thanks,
Joan

Tom Copeland

If you hire your husband there is little, if any financial benefit for doing so because he has to report the money he would earn as income. Yes, if you don't pay your daughter, but instead give her gifts this is not income to her and is not deductible to you. Trying to do this with a non family member won't work. You must treat her college friend as an employee.

driveways scotland

Yes its very true that don't hire any of the Relative as a Employee.But you can Hire your Friend as en employee and you can give them Salary.Its Batter than the Family Members or the Relatives.

Cassey

My niece who is 18 is going to be staying with me for 6 months and wants to help with Daycare. She isnt going to be paying rent, can I gift her spending money while she stays with us? Or do I have to pay her? Which is the better option?

Tom Copeland

If you pay her you will have to treat her as an employee (withhold social security tax, pay state and federal unemployment tax, withhold state and federal income taxes, and perhaps pay workers' compensation insurance). If you do all this, then you can deduct what you pay her and the taxes as a business deduction. She would have to report her wages as income.
Instead, I would recommend not paying her at all. You can give her some spending money as a gift. She would not have to report this as income and you would not be able to deduct it as a business expense.

erica henson

i live in NY i am a group child care provider i 2 9yr olds i pay an allowance to for chores what i was wondering if they could do some task above and beyond for child care business and get pay not being 14yrs old with working papers not sure i did call board of labor seem to be confusion being there r many exclusions like child golf caddies, actor, newspaper delivers farm help etc. i thought this would be the next best place to come for information thank you for ur time

Tom Copeland

Federal law allows you to have your 9 year old children work for your business. NY state law says you can't hire your own child under age 12 to work for your business. For more information: http://www.labor.ny.gov/workerprotection/laborstandards/workprot/wphmpg.shtm. See the section on Types of Working Papers

erica

k have another ? my basement we r turning half of it int to daycare supplies only but to do that we have to water proof the basement and in doing so the water proofing will be along in the area of the basement where we r walling it off ( building walls) to use only for daycare storage now can i write off the thousands it is going to cost to water proof this area so supplies don't get damaged business 100% or something else thank you

Tom Copeland

If the basement area that is going to be waterproofed is only used for your business, you can deduct 100% of the cost. If the area is also being used for personal purposes, deduct the time-space percentage of the cost.

Patti Browne

my husbands family won the lottery! It puts us into a higher tax bracket for this year. My question is my tax preparer told us to hire our 18yr old daughter.Not sure what to do.I know we need the deduction, but really sounds like its compicated. How do i find the paper work and do I, hold out the taxes? What do you think

Tom Copeland

Hiring an 18 year old means withholding Social Security taxes, and withholding federal income taxes. Depending on your state laws, it may also mean paying state unemployment taxes and purchasing workers compensation insurance. Your daughter cannot do common household chores but must do work that is directly related to your business. See my articles about hiring family members in the Record Keeping section of the Index.

Au Pair

Absolutely right.if you hire someone to help you care for the children in your care you must treat this person as your employee, not as an independent contractor.

Stephanie

If my mom comes in as my substitute caregiver 10 - 11 hours a week, and I want to "gift" her with cash, can you tell me how often I'm allowed to give her this gift? Can it be monthly, bimonthly?

tom

There is no limit as to how much you can "gift" your mother.

Benita Castro

I have a friend, that hired her daughter to help her in her home daycare, she pays her less than minimum wage plus the spot for her granddaughter in the daycare. The daughter told her, "She could go to jail and have problems with the IRS if she doesn't pay her minimum wage." Is this true? Once you take her pay for the week plus the child care fee it is over minimum wage.

Tom

You don't have to pay your son or daughter the federal minimum wage. There may be a state law that says you have to pay state minimum wage for family members. And yes, the free care would be included in the compensation.

Pam Rassatt

I am looking into having a 2nd adult caregiver full time 9-5 mon-fri., just for a 2 month time May 16th to June 20th (while I have some new kids starting, and before the school year kids leave) She is not a relative, but a friend of our family from church. Can I pay her as a gift being she is not a relative? would it be acceptable to draw up a contract with her stating that she is not an employee and would be paid as a gift? And that there is no set term of time and will be as needed basis?

Tom

No. Since she is not a relative, exchanging work for gifts would be seen by the IRS as bartering and you would have to pay all the same payroll taxes as an employer. So, you must treat this person as an employee. Putting in a contract that she is an independent contractor will not work.

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