Hi all. I'm looking through care.com to hire child care for my daughter. Because I'm going to be paying someone about $10/ hr, which is almost $3 more than minimum wage, do I have them file the pay w/ the IRS? Is it normal to ask that? I've only used daycares in the past, never paid an individual. It's going to be 3 hrs a day, 5 days a week.
They will be considered self employed so taxes will be on them. Have them fill out a W9 - that is what you file to report what you paid them. This allows you to claim wages paid to them on taxes. You can download the form from the IRS web site.
My private provider files her own taxes. I do keep track of what is paid and mention it on my taxes in April.
Yep, ask them to complete a w-9 and be sure it is completed properly. Name & address as it is filed with the IRS, social security number, sign, and date it.
If they claim the income they will give you a 1099 in January. Just because 10 dollars is above minimum wage means nothing to whether someone will claim the income. Why would it? Do you think anyone in their right mind would watch someone's kid all day for minimum?
You need to ask now and expect that the rate will increase if you want to claim the expense. At least in my opinion it is stupid to claim child care if it is just a one on one arrangement. What the increase ends up being is shifting the liability from you to them plus compliance so no one actually ends up with more.
I really wonder if people realize how little they get back in real money by making a child care deduction. First there is a limit, then it is limited by income and then after you get the deduction settled it is just that times your marginal tax rate. I did the math last year and the max anyone can get back for childcare in real money is less than three hundred dollars! Is that really worth the paperwork?
Here is some more information on nanny taxes... http://tinyurl.com/ydgw3qw
I've used private providers but never verified their tax information beyond asking for their tax id or social for my tax filing purposes. They've always provided it, so I assume they're doing what they need to on their end.
If the person comes to your home, then you are the employer and you have to withhold taxes, etc. For that, you should talk to a tax professional.
If you take the child to them, then you get their social security number or tax ID number at the end of the year so you can claim the child care credit on your taxes.
It is up to you. You can hire them as contract labor where they sign off that they are to file their own taxes or you can pay them and withhold taxes for them. If you do that you will have to pay SS for them on top of their wages.
I would ask a tax accountant to make sure but I hired a lot of substitutes through my child care business and they just signed they were contract labor, doing a job for a fee, then they filed their own taxes and wages. There was no end of year forms I had to fill out for them, nothing. I paid them and they were on their own.
