cancel
Showing results for 
Search instead for 
Did you mean: 
Highlighted
Level 1

grandparent watching kids - how to file 1099 and taxes

@macuser_22      yea and if she does receive that letter after filing the income as "other income" - then she will refile SE income and go through the process of deducting all the expenses that would then cause her to not pay the SE tax anyway.

I would bet she is much more likely to have the IRS go after her for Filing as Schedule C and paying 0 tax (as @AmeliesUncle pointed out) , then filing as "other income" and paying full income tax.   and in her case she would prefer the "other income" and paying more income tax than having the hassle of proving deductible expenses every year. 

Highlighted
Level 6

grandparent watching kids - how to file 1099 and taxes


@macuser_22 wrote:


Bottom line - she can report it anyway that she wants, but if *you* deduct it as child-care expenses on your tax return with your mom's  SSN as the child care provider then if she does not report it on a schedule C and pay the SE tax, it is a 80% probability that she will receive an IRS audit letter in a year or two asking for the schedule C and SE tax and a big bill for back interest.     Your deducting it as child care makes her a child care provider by definition whatever she wishes to call herself.


Maybe.  If it does come, just respond that the income is shown as "other income" and list the Nine Factors showing the answers and details for each one.

Highlighted
Level 15

grandparent watching kids - how to file 1099 and taxes

28 years in the business and 8 years of teaching the income tax return prep classes for a major income tax company gives my answer weight ... If you report the deduction on your return it MUST be reported on the Sch C on the child care provider's return ... that is why they instituted the form 2441 in the first place ... it was not to give the parent's a deduction so much as to get the parents to report the child care providers who were not reporting this income at all.  Look at the form 2441 ... you must indicate who you paid, their address and SS# or EIN ... that is how the IRS cross references your deduction and their income ... if the income is not reported on the Sch C then an Audit letter will be issued.

 

NOW ... on a Sch C you can take deductions against the income that includes a Home Office deduction and in the end very little will be taxable normally ... so before you cry foul your mom should work the numbers so you can see it will not hurt too badly.

Highlighted
Level 1

grandparent watching kids - how to file 1099 and taxes

@Critter again the point being made is not that the income will not be reported. 2441 will indicate the SS# and then Grandma will report that same income on her 1040 under schedule 1 line 8 as "Other Income" - because the activity is loss making and has no profit motive (i.e. it's not a business,  its a grandma watching a grandchild).  

Per the 9 factors of whether it's a hobby or a business that @AmeliesUncle keeps mentioning

https://www.journalofaccountancy.com/issues/2013/oct/20138370.html

Highlighted
Level 15

grandparent watching kids - how to file 1099 and taxes

Ok ... so you want to put it on line 8 in full instead of putting it on the Sch C minus deductions ?   So you want to pay more in taxes ???  

Highlighted
Level 1

grandparent watching kids - how to file 1099 and taxes

@Critter see posts above - yes Grandma is willing to pay more tax because she does not want the hassle of keeping meticulous expenses to later prove those to the tax authorities (it's a small enough amount in taxes that it's not worth the hassle). And in reality she is not running watching her grandchild as a business. 

Highlighted
Level 15

grandparent watching kids - how to file 1099 and taxes


@pasknyc wrote:

@Critter see posts above - yes Grandma is willing to pay more tax because she does not want the hassle of keeping meticulous expenses to later prove those to the tax authorities (it's a small enough amount in taxes that it's not worth the hassle). And in reality she is not running watching her grandchild as a business. 


Reasonable expenses for a related child care (baby sitter) are almost NEVER challenged by the IRS. but yes, if deducted then records should be kept.   But, there is no requirement  to even deduct expenses, then no records are needed.

 

If she want's to avoid "hassle" then wait to see the hassle involved in a full fledged IRS audit for improperly reporting self-employed income under the wrong category.

 

You have gotten the advice from several regular forum posters, many of who are tax professional with many years of experience. 

 

However, the advice that you receive over the internet should be taken for what it is.   If you want an actual answer then make an appointment with a tax professional, EA,  or tax attorney in you area that you can sit down with and can have all the facts.

 

in reality, the grandmother should do that, not you, because it is her income, not yours.

**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**