@jglsea wrote:
To clarify, if I do give my Mom a dress valued at $100 instead of cash, CAN SHE CLAIM THIS AS INCOME ON HER TAX RETURN (in order to build up her Social Security quarters to qualify for Social Security when she is eligible)?
If someone works in your home, they are usually your household employee. If that person is your parent, you usually don't have to pay household employee tax or give them a W-2. They report their wages as "household employee wages not on a W-2" on line 1b of form 1040. However, this won't create credit with the social security administration since there are no social security taxes withheld. (There is a rare exception in which a parent who provides in-home care for grandchildren is required to get a W-2 and be subject to SS and medicare tax. See publication 926.)
https://www.irs.gov/publications/p926
If they work in their home, they are usually considered self-employed. They report their income on schedule C. They can deduct ordinary and necessary expenses (such as the home office deduction to deduct part of their household expenses as business expenses for day care) and they pay self-employment tax on the net profits. Because of the self-employment tax, this does create a credit with the social security administration for retirement or disability benefits.
Wages or income includes anything of value that you give them as compensation for their services. This can include physical goods.
People who barter usually run into audit trouble for under-valuing their barter income. However, if you over-value the items to create a larger social security wage, that could potentially be considered tax fraud. Normally if you pay in cash or check you have financial records to back it up, like canceled checks. In the case of barter, you should carefully document your items, how you value them, and what services were provided in return.
