Hi there,
My kid did some work in her social media and she got some income. She got my consent to use my name to get that and use my personal PayPal account to receive those income. That personal PayPal account is associated with my personal checking account and I do not have a business account.
I'd like to have all of those income paid to her since that is really what she earned although that is only a small amount of money. Let's say it is $800. I am on W2 with an employer and do not have LLC. I have the following questions:
1. Without an LLC and EIN, can I pay my kid for that amount? If so, do I need to send an 1099-MISC form for that and how could I do that without EIN?
2. My understanding is that I will need to report the $800 as my income, but if I pay that to my kid, can I deduct that $800 and how could I do that? Do I need to file schedule C for this year's tax return?
3. Does my kid need to file a schedule C for this income when filing this year's return? Does she need to pay self-employment tax, FICA/etc for that income?
4. What's the best practice to do such for next year? Is it better if I setup an LLC, get an EIN, and create a business banking account and use that LLC to do business on her behalf and pay the income to her? It seems hiring her as an W2 employee is less reasonable compared to hiring her as independent contractor because the income is not steady and my sole purpose is to let her get what she earned through her work? From tax perspective it looks like W2 employee is better since hired by parent business does not need to deal with FICA/etc and self-employment tax although I will need to do tax withholding for that?
Thank you very much for your help.
