Daughter's uncle who lives with us is providing ch...
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Daughter's uncle who lives with us is providing childcare over $4000 in 2021 is he considered a "household employee" or self-employed?

Our daughter's uncle lives with us, but is not our dependent. He makes income from rental properties and runs his own out-of-home custom desserts business. He will be providing childcare for us for the first 3-4 months of 2021, and I am not sure if we should pay him through a payroll service like we did for our previous nanny. The total amount we will end up paying him for 2021 will be greater than $4000. I know that if the care provider works in our home he/she is usually considered a "household employee," (this is how we set things up for our previous nanny who came to our home), but what if the home is ALSO the care provider's home? I'm also wondering if it is better or worse for the income to be considered self-employment income for him given his other self-employment income streams. If the income should be considered self-employment do I need to complete a 1099 for him or how does he report it? Thank you!

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Level 15

Daughter's uncle who lives with us is providing childcare over $4000 in 2021 is he considered a "household employee" or self-employed?

Because this is family, I see no reason to make a tax nightmare out of it.  He gets room and board, and he provides child care.  Extended families have been doing this since before humans climbed down from the trees and walked upright.

 

Is it your agreement that you will pay him in cash in addition to room and board?  Does he pay rent?  Is there some other reason that you want to pay him, does he need to show income or do you need the deduction for some reason?

*Answers are correct to the best of my ability at the time of posting but do not constitute legal or tax advice.*
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