Child Care - 1099-MISC

[nkustura]

Hi everyone,

I have a client who has two children. His father provided child care for the grandkids and son (my client) paid his father $1800 in 2012 for this. The $1800 is taxable income on fathers return. Does his son have to file 1099-MISC with IRS for this service, along with giving his father 1099-MISC so he can report as income? I understand that any payments for goods or services that exceed $600 require 1099 form to be filed, but I am not sure if there is anyhting tricky when family memebers are involved.

Any comments are greatly appreciated.

Thanks

[DaveinTexas]

Not at all

A 1099 MISC would be used if the father provided services to your client's business. It is up to the father to report the income without the need to file any forms.

Son gets credit on the 2441 and Father reports income on line 21 if he will no longer proceed with caring for the children in the future (not a regular and continuous activity) or on a Schedule C as self employment income if he will continue pursuing this activity.

[FEDUKE404]

Curiosity killed the cat

Just interested to know if the "day care" was in the home of the grandparent or in the home of the dad. I assume you are planning on filing a Form 2441?

Also, was there any "day care" for times other than when the (single?) dad was actually working?

FE

[nkustura]

Details

Thank you for your responses.

Here is some more details regarding this situation. Mom and dad both work, and grandfather was watching the kids on Fridays due to both of them being at work at the same time. Grandfather was watching the grandkids at his house and he provided meals for them while there. Grandfather wants to pay taxes on this income including social security and medicare. He had no other income during the year and he needs some more social security credits for retirement so he definitely wants to pay SE on this income.

I was going to file schedule C on grandfather's return including schedule SE for self employment tax so he can get soc security credit.

For mom and dad's joint return, I was going to fill out Form 2441.

Please provide any comments or feedbact you might have. I really appreciate all the help.

Thanks

[FEDUKE404]

Observations

I think you are basically correct with the facts stated.

(I do find it entertaining that this scenario is essentially the opposite of what we normally read here re the "not a regular and continuous activity" issues for Sch C and SE !! I guess you would need to determine at what point the grandfather crossed the imaginary line and went from irregular/non-continuous activity to regular/continuous activity.)

Remember with a Sch C you may have to deal with some behind-the-scenes expenses, to perhaps include Form 8829 issues. Depending upon what other expenses the grandfather may have, he could be perilously close to NOT having enough net Sch C income to collect a Soc Sec work credit for the year.

And then you could toss it on line 21 as miscellaneous income, save the SE tax, and the son's master plan crashes. But I digress. . . .

I would warn grandfather that his own tax return might not be that simple to prepare.

FE

[nkustura]

Thanks FEDUKE404 for your comment.

Grandfather is planning to watch the grandkids for another 2 years until they start school. So, I assumed we can still do schedule C since the activity is intended to be continuous. I haven't come across good definition of "continuous" activity for schedule C purposes. Any idea what continuous activity would be defined as?

Thanks,

[Bonnie]

I'm sure they don't care if you want to put it on a Sch C if you classify it continuous or not, seems just a clause to get out of doing Sch C for those who don't want to pay the SE

[DaveO]

My experience with the IRS on these issues has been if the activity generates a profit, it's a business. If it results in a loss, it's a hobby. I wouldn't worry about the IRS questioning the "C".