Approved Child Care Provider

[khopkins21]

If you paid a 16 year old for child care services, does this meet the requirements to receive the child care credit?

Also, would the 16 year old be required to file a return?

[ChEAr$]

No problem as to age of provider

for federal tax purposes, anyway.

Problem IS whether or not services were provided in taxpayer's home or not.
If in home, then she's an employee and subject to schedule H tax.

If in the provider's home, it's self employment situation and you need a W9
filled out.

[khopkins21]

Approved Child Care Provider

The care was given in the providers home and was the 16 year old's only source of income. He is also claimed as a dependent on his parent's return. Is a return still required?

[BP.]

age

>> No problem as to age of provider<<

Age is a consideration if provider is taxpayer's child. Original post did not specify. Cannot be under age 19. See TTB p. 11-4.

[ChEAr$]

please clarify for us

Who was the 16 year old? Taxpayer's own kid or a neighbor?

[jerome]

Since the services are provided in the home of the person being cared for, generally the 16 year old would be considered a household employee.

The tax book page 14-1 says a babysitter age 18 or over would be considered a household employee. IRS Pub 926 says an employee who is under age 18 at any time during the year is not a household employee, unless it is the employee’s principal occupation. If the employee is a student, providing household services is not considered to be his or her principal occupation.

This means the household employee rules that require FICA and FUTA tax do not apply. The 16 year old is exempt from FICA withholding. Therefore, the only filing requirement that would apply is for income tax. If the kid had earnings less than the standard deduction ($5,150 for singles in 2006), no return is required.

Of course the payer might want to claim a child care credit for the money paid, in which case they would want the kids name, address, and social security number to list on Form 2441. If that is put on their return, the IRS is going to look for the 16 year old to file a Schedule C if it is more than $400. That doesn’t mean one is required. It simply means the IRS is going to expect it, and you better know all the facts to tell them why a Schedule C is not required.

[khopkins21]

To Clarify

To clarify:

1. The 16 year old is not the taxpayer's child.
2. Care was not provided in the taxpayer's home.
3. $2500 was the amount paid for care.
4. The payer want to claim the child care credit but wants to know if the 16 year old will have to pay SE tax.

Thanks for your help.

[khopkins21]

Neighbor

Who was the 16 year old? Taxpayer's own kid or a neighbor?

The 16 year old is a neighbor.

[jerome]

If the 16 year old did not provide the care in the taxpayer’s home, then the household employee rules cannot apply. The exception to FICA withholding for household employees cannot apply. You are back to normal kid rules doing part time work while they are still full time students.

If the 16 year old kid who works at McDonalds 10 hours a week has to pay FICA taxes on the part time work, even though he or she is a full time student, then the 16 year old kid who provides babysitting services 10 hours a week has to pay SE tax on the part time work, even though he or she is a full time student.

No difference.

The only exception would be if the services were provided as a household employee in which case the under age 18 rule would exclude the services from being subject to FICA tax.