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aliaricam3 · Dec 21, 2007, 01:00 PM

Hello everyone, I was wondering if my sister should claim money that I pay her to babysit.
She does not work and has two children, her boyfriend (the children's father) takes care of the 3 of them. If I want to claim the money I pay her does she also have to claim it. We live in Massachusetts

MOWERMAN2468 · Dec 21, 2007, 02:36 PM

You betcha. ALL income is to be counted. If you counted paying her and she didn't count it, I guess that would be hard to explain to the state and the IRS. Best bet would be to count ALL income and payments.

shygrneyzs · Dec 21, 2007, 03:11 PM

If you want to claim the money you paid her, she will need to report it. Now she could choose not to report it but the IRS will catch her. The last time I did the child care credit I had to list the daycare provider. Maybe that has changed.

Fr_Chuck · Dec 21, 2007, 03:59 PM

Yes, if you want to claim the child care on your taxes, you have to have her tax id number or social security number when you claim it on your taxes. Now if she does not claim it, that will be her problem, since you reported her income on your tax return.

So all she has to do is give you her social and you can report it, but if she does not report it, then she can be in trouble

AtlantaTaxExpert · Dec 21, 2007, 04:21 PM

HOW MUCH money are we talking about?

If it is over $600 for the year, then, yes, your sister must report it as a business on Schedule C. Whether she pays taxes or not depends on the total amount earned and who claims the children (your sister or her boyfriend).

MukatA · Dec 21, 2007, 10:25 PM

She must file tax return if your sister's income (what your pay her minus her expenses related to this job) is $400 or more. Also this net income is subject to SE tax at 15.3%, which she must pay even if there is not federal income tax or state income tax.

AtlantaTaxExpert · Dec 22, 2007, 09:14 PM

Even if her expenses totally negate the income, she would have to file a tax return to account for the money paid to her by her sister, as her sister WILL report her name and SSN to the IRS.

aliaricam3 · Dec 26, 2007, 07:38 AM

Thank you to all, One more thing. Where I can not provide a w-2 form how does she go about filing

AtlantaTaxExpert · Dec 26, 2007, 10:17 AM

You would not provide a W-2; that is a form provided (and filed) by employers to the employees.

Your sister, by law, is NOT your employee UNLESS she is living with you.

You would provide (and file with the IRS and state tax department) Form 1099-MISC, with amount paid to your sister entered in Block #7, Non-employee Compensation.

She would then file Form 1040 with Schedules C and SE for 2007.