Sister in Office

[Possi]

My sister is here for a week helping me in the office. She is 65 and on SS. That is her only income. She will probably help me on-and-off for maybe 3 weeks total. I'll pay her, but it won't be much. She is family and happy to have something to do, and likes helping. I pay her travel expenses from SC to VA but I need to pay her a love gift for all she does.

So, my question is this: Should I pay her out of my personal pocket or should I pay her on a 1099 and expense it to the corp? It will be over $600, but not more than $1500, I think. I don't know... Not sure about any of this.

Would it help her SS income if I pay into FICA for her? If I pay her a 1099, I would personally pay her taxes on that. I don't want to do a W2. I could do a W2, but that's just generating more work for me that I don't need.

Help?

[MAJ]

Some Family Help

Sounds like you have the details worked out and are just looking for confirmation.
The 1099 is fine in my eyes.

However, are you writing off the transportation costs as well?
I would! Add a flat rate to the 1099. This way you get additional write off.

Does/will she do this annually for you?

Taking advantage of the next few weeks lower SS payments. We're talking $200 @ 13.3%.
If the help is valuable - take the deductions and the help.

[dan doshan]

Do W2. Sister might not like getting a 1099 for 1200 or so and have to file a return come tax time. Also she is an employee so a 1099 would not be appropriate. Do what is right.

[Burke]

Agree. She is a W-2 employee any way you look at it, so FICA is involved. FUTA might not be an issue if she is paid less than $1,000. W2 income will be factored in to next year's SS benefit.

[Lion]

W-2

If you're already using QB, it's easy to do payroll. W-2.

[taxea]

If she is volunteering her time just to be doing something you are allowed to gift any one person an annual amount each year.

[erchess]

gifting???

Trying to make a nontaxable exchange of gifts out of an employment situation strikes me as dicey at best. I don't have a cite but if it were possible wouldn't more firms be doing it? If I'm not mistaken the gift tax exclusion for 2012 is 13K and at least around here a lot of people earn that or less in a year.

[Burke]

It's not possible. Employer-employee relationships prevent this (except for minimal gifts like a turkey or ham at Christmas.) No amount of cash can be construed as a gift when employment is involved.

[S T]

Sister Volunteering

If Sister Volunteering - then your amounts you pay to her for her Assistance would be non-deductible, as as you say a "Love gift" Sometimes we just do that to assist Family Members.

If you actually hire her as an employee - then a W-2 form with the appropriate taxes withheld, and you would also have Work Comp and Payroll Taxes. Your sister would then also accrue additional SSA-Mcare credits for her account.

Quarter of SSA Earnings credit 2012 is $ 1,130 http://www.ssa.gov/pressoffice/colafacts.htm

Sandy

[JohnH]

I think taxea has a novel idea here. If sister is really volunteering her time and if Possi doesn't care about a tax deduction, then a gift makes sense.

[S T]

SSA Employer-Employee Relationship

Here are some excerpts from SSA - and way too long so I also pasted the link

1. Why is it important to determine whether an employer and employee relationship exists?
In order to correctly apply Social Security coverage it is essential that it be known whether an employee and employer relationship exists between the person (worker) performing the services and the person or firm for that the services are being performed.
----------------------------------------------------------------------------

2. What is the definition of an employee for purposes of Social Security?

Any worker who, under the usual common law rules applicable in determining the employer and employee relationship, has the status of an employee. Thus, making a determination whether a relationship exists requires more development than looking at a paycheck. It requires independently looking at each worker and a making a decision based on the facts isolated to that person. However, in order to ease the process of making relationship determinations, we created the common law control test.
--------------------------------------------------------------------------------

3. What is the definition of an employer for purposes of Social Security?

A person can be an employer if he employs one or more employees. Employers can be an individual, a corporation, a partnership, an entity, or other types of organizations. Although a person may be an employer, and services may be performed for his purposes, this does not constitute employment or that an employer and employee relationship exists.
-------------------------------------------------------------------------------

4. What is the common law control test and how does it relate to employer and employee relationship determinations?

The common law control test is the basic test, using the common law rules, for determining whether a relationship exists between the worker and the person or firm that they work for. Under the common-law test, the employer has the right to tell the employee what to do, how, when, and where to do the job. As you will see in the following questions and answers, there are factors, or elements, which indicate such control over the details of a person’s work. For a complete list of factors, refer to question 9.

--------------------------------------------------------------------------------

http://www.ssa.gov/section218training/advanced_course_10.htm#1

Possi, I think you will have to apply the facts and circumstances, then there is also your State Employment Payroll Requirements.

Sandy
.

[Bees Knees]

Family members can certainly volunteer to work for free, and family members can certainly gift money to one another. The key is, would the work be done for free if no gift of money was offered? And, would the gift of money be given if no volunteer services were provided? If you can’t answer yes to both questions, then you can’t call it a gift.

In other words, the minute strings are attached to the gift, its no longer a gift.

[Gretel]

We discussed the same subject some time back with household help from daughter. One important issue to also consider is insurance. With other words, what happens if relative gets hurt on the job?

Of course, in an office it is not very likely (unless you are as plump as me, almost breaking my neck some years ago, dancing back to my desk).

[Possi]

Not skirting

Trying to make a nontaxable exchange of gifts out of an employment situation strikes me as dicey at best. I don't have a cite but if it were possible wouldn't more firms be doing it? If I'm not mistaken the gift tax exclusion for 2012 is 13K and at least around here a lot of people earn that or less in a year.

I'm not skirting around anything. The fact is, she is my sister and would do this for free. She is not my employee. That is why I asked about this. She visited me last summer and helped clean out some old files in my office, and I personally paid her heat bill for the winter and called it Christmas. I didn't pay her for working.

Now she is here answering my front door and filing away completed tax returns. Oh, and she makes me eat. If I paid her on a 1099, I would also personally pay her taxes. So, she isn't getting hit with a liability for helping me. If I pay her on a W2, the state unemployment agency wants a piece of me, the bank wants a piece of me, (they do my payroll and it's only me), the FUTA gets a bite, and the IRS always gets a piece of me. I work from home, it's not a big business, and I pay my own health insurance. I'm sure there are lots more just like me on the board, so I was just asking... No big deal.

I'd hate for anyone to think I'm trying to do anything dicey or underhanded. I work especially hard NOT to have that kind of reputation.

Edited: Thanks for all the posts. I was afraid I wasn't understood. Now I see that more of you understand. I'll see how much I am going to pay her, depending on how long she stays. She is here for a week, then leaving, then will come back if I need her, which I will...
Thanks again... these perspectives are wonderful. I respect every one.

[JohnH]

If my sister volunteered to come to help out in my office, I'd certainly be inclined to give her a gift in appreciation.