I earned money cleaning house for a friend but they are not reporting the expense. how do I file?

[echo340]

I cleaned house for a friend and was paid in cash each week. He won't be claiming the expense on his taxes, but I feel like I should be paying taxes on the income. How would I file? I have the same situation with another friend I babysit for..

[SweetieJean]

Your friend cannot claim housecleaning expenses, as they are not deductible in any case.

[SweetieJean]

<a rel="nofollow" target="_blank" href="https://www.irs.gov/taxtopics/tc756.html">https://www.irs.gov/taxtopics/tc756.html</a>

[Hal_Al]

Your other friend most likely will be claiming the day care credit and will ask for your Social security number. If so, the IRS will know about that income

[Hal_Al]

The IRS considers  undocumented cash income (no W-2 or 1099-MISC), for work performed, to be self employment income. Enter at "Business Income & Expenses" and TurboTax (TT) will complete Schedule C or C-EZ for you and allow you to deduct any expenses associated with this income. You'll also have to pay self employment tax (social security) on any profits greater than $400.

There is an exception to  income from babysitting and house cleaning being subject to self-employment tax.. You have "household employee"  wages. If  no single employer paid your more than $2000,  and you sat/worked in their home, not yours, you may be able to avoid the self employment tax. But, you will also not get credit for these wages with the Social Security Administration, for future benefits. 

You may have to upgrade to the Self Employed version of TT for self employment income

[Pj8]

If I have a child I always get child credit but this year I cleaned house for a older lady and baby sitting for a friend and made say around 2000 for cleaning and 1200 for baby sitting in there home all year will I have to pay in and my son lives with me all year as always  can I still claimchild earn income  and be ok  or will I have to pay in

[xmasbaby0]

@Pj8 You have had self-employment income for which you will owe self-employment tax for Social Security and Medicare.  You report this income and any expenses you had related to it on your tax return (cleaning supplies, etc?).  If you are the custodial parent of a child then you may get some child-related credits like earned income credit and a little child tax credit.

However, you earned very little from working.  How were you and your child actually supported?  Is there someone else who supported you that can be claiming both of you as dependents?  You did not support yourself and a child all year on barely over $3000.

When the Free File software is available that is what you should use to prepare your return.  It becomes available in January.

[Hal_Al]

The money you hear about people getting for just filing a tax return claiming kids requires them to  have some earned income (wages or self employment). Without earned income, they are not eligible for the "refundable" Earned Income Credit or Additional Child Tax Credit.  Both credits are calculated on the amount of earned income you have. No earned income means no "refund". A small amount of earned income means a small refund. The child tax credit does not "kick in" unless you have at least $2500 of earned income.

The earned Income Credit on $3200, with one child, is $1097. The Child Tax credit is only $105.  The self employment tax is about $452.. So, you will net about $750 "refund".

A child can be the “qualifying child” dependent of any close relative in the household. If you live with someone else, e.g. your parents, it may be better if they claim your child.

Instead, you could allow the non-custodial parent to claim the children.  Non-custodial parents are allowed to claim the child tax credit (up to $2000), but not the Earned income credit.

If you are a student, over age 23, and are not claimed as a dependent by someone else (e.g. your parent) you may be eligible for the up to $1000 refundable American Opportunity (tuition) Credit. That credit is not dependent on having either kids or earned income. You must be at least a half time undergraduate student and actually paid tuition (not just had it paid by grants). Tuition paid by loans counts as paid by you (since you have to pay that back, someday)

[Hal_Al]

@Pj8  One additional thought.

You say  baby sitting in their home. The house cleaning, obviously, is also in the client's home.

The “Nanny Tax” specifically refers to the social security tax paid on a household employee’s (nanny, maid, house cleaning, baby sitter, gardener etc.) wages. The most proper way to report your income would have been for your employer to have given you a W-2. In practice, this is seldom done. That having not been done, the 2^nd best choice is USUALLY for you to report it as self employment income on schedule C, paying your own social security tax ( “self employment” tax) on schedule SE, as previously described.

But, if the Household employee wages  were from more than one employer and no single employer paid your more than $2100, you may be able to avoid the self employment tax and get the full $1202 in refundable credits.  But, you will also not get credit for these wages with the Social Security Administration, for future benefits.

In TurboTax, enter at:

 Federal Taxes

Click on Wages and Income

Scroll down to Less Common Income

On Miscellaneous Income, 1099-A, 1099-C click the start button

On the next screen click the start button on Other Income not already reported on Form W-2 or Form 1099

Answer Yes on the next screen and continue the interview until it completes.

TurboTax puts the amount on line 1 (wages) of form 1040  with the notation “HSH”. It is considered earned income.  But, this technique is more likely to invite IRS scutiny, than reporting it as self employment.

[Lashed302]

You can ask him for a 1099 though he would have to get an ein from the irs to pay you as a household employee. But, just claim the earnings as self employment. And save recipets for any items used to clean. 

[Lashed302]

Household employee.