@julito1403 wrote:
Hi Sharon, thanks for your answer. She is 17 and made $11000 in her own part time job on 2024 but as she was helping me in my Childcare center (Daycare at my house) i paid her around $2000 for the whole year. Just to confirm, it is okay to send her a 1099 NEC for the amount of $2000, right? Thank You again.
You've got a couple of things to think about.
A 1099 would only be appropriate if she is an independent contract. If she is an employee, the law requires you to issue a W-2, and withhold mandatory social security and medicare tax and pay that to the IRS on the appropriate form (941 or 944), even though her income might not be enough to withhold income tax. (There may be an exception to mandatory social security and medicare tax withholding when you employ your own minor child, but I need to double check that.) Your business needs a federal tax ID number if it has employees. (If you are a sole prop with no employees, you can use your SSN and a separate EIN is optional; when you hire employees, an EIN is mandatory.)
The difference between an employee and independent contractor is discussed here.
https://www.irs.gov/businesses/small-businesses-self-employed/independent-contractor-self-employed-o...
It boils down to who controls the time, manner and place of performance of the duties. If you tell your daughter, "you must work 3-6pm Monday, Wednesday and Friday" then she is probably an employee. As an employee, she will have additional rights under state law. She may be subject to minimum wage laws, although sometimes states make exceptions when you employ your own minor children.
If you issue a 1099-NEC and she files a tax return as an independent contractor, she will pay 15% self-employment tax on her compensation, even though she might be exempt if she was treated as a minor family member employee.
The IRS has significant penalties if you classify someone as a contractor who should have been an employee (although I presume your daughter would not file a complaint against you). I'm not going to tell you that you should report her as an employee or contractor, but you may want your own professional tax advice.
