Schedule C or not

[taxtime]

I have a client whose dependent is a full time student. They are going to perform babysitting services every evening to the tune of about 20,000 per year. I was going to treat this as schedule c income and subject that the money to SE. Does that sound correct to you folks? Dependent is 17 years old.

[Jesse]

Assuming the services will be at their home and not the home of the child I would say you are correct.

The distinction I am looking at is if they actually go to the home of the child they are babysitting they could be a household emplyee.

[sea-tax]

My 2 cents would be to treat it as a schedule c and then talk to the child and the parrents about setting up a simpe plan for the business and have the child contribute max to the plan. WOW what a great start she would have on her future retirement.

I do understand what Jesse is talking about and she maybe a household employee, but either way it really means very little. She is still lucky to be a 17 year old making 20k a year.
If she is a household employee talk to the parents and child about maxing out a Roth or IRA contribution each year.

[taxtime]

Thanks

She will be providing the services in the home of the children she will be watching. Should have stated that fact up front. That does make her a household employee. Yeah that is a pretty good income. Beats my paper route. Does that put the burdon on the folks she is the household employee of to withhold taxes (fed Fica etc.)? If I understand it correctly, they can do that but are not required. Sorry for not putting that info in my first post.

[fitzpats]

She will be providing the services in the home of the children she will be watching. Should have stated that fact up front. That does make her a household employee. Yeah that is a pretty good income. Beats my paper route. Does that put the burdon on the folks she is the household employee of to withhold taxes (fed Fica etc.)? If I understand it correctly, they can do that but are not required. Sorry for not putting that info in my first post.

Quick question, and this may not mean anything either, but I would like to know the answer to this, so here goes. Is she engaged with only one family or multiple families? Also, does your client dictate the wage or is it based upon what the parents feel like paying? Seems to me that if your client is working for multiple families and dictating the wage, then your client would be contracting services to the general public and would be a self-employed business owner and not a household employee.

[gkaiseril]

Not Always Clear

Unfortunately there is no clear distinction. See form SS-8 for some of the questions for making the determination. The final decision is based on the overall appearance of the specific situation. Just because an individual works for one person does not make that individual an employee. There are control of how the job is done, is the individual providing the services restricted to this employer only, are days and hours rigid, are others used to provide the same service, etc.

[taxtime]

Client is

working for one family. Client does not dictate wages. They were told we will pay you x to watch the kids. Even if client is a household employee, would that prevent a schedule c filing? The only thing client will have is income. No expenses for travel or anything else as the house is a couple of doors down. So they would be paying tax and se on the entire amount. I guess the question then is what about FUTA and SUTA taxes (if any). I just want to do the right thing by my client. They also want to pay what they are suppose to pay. I am glad they came to me before they made the deal. I thought if I just used sch C and paid fed and SE client would be ok. I guess it is much more complicated. I thought it would be easy. That is what I get for thinking. Thanks for everyone’s input.

[ChEAr$]

classification

working for one family. Client does not dictate wages. They were told we will pay you x to watch the kids. Even if client is a household employee, would that prevent a schedule c filing? The only thing client will have is income. No expenses for travel or anything else as the house is a couple of doors down. So they would be paying tax and se on the entire amount. I guess the question then is what about FUTA and SUTA taxes (if any). I just want to do the right thing by my client. They also want to pay what they are suppose to pay. I am glad they came to me before they made the deal. I thought if I just used sch C and paid fed and SE client would be ok. I guess it is much more complicated. I thought it would be easy. That is what I get for thinking. Thanks for everyone’s input.

let's get this straight now. This is a 17 year old kid who will baby sit in another's home?
If so, forget about schedule c. It just doesn't apply. Kid will be an employee and client's
responsible for reporting on schedule h and furnishing a W2 year's end.

[taxtime]

The responsibilty

Will fall on the individuals who "employ" my client. If they do not do what they are suppose to do, my client would still be liable for all applicable taxes? I don't want them to have unreported income. That is my concern that the folks that want my client to wacth their kids will not do the right thing. I will advise my client if they don't, do not get involved. Thanks again.

[ChEAr$]

All responsibility will be

Will fall on the individuals who "employ" my client. If they do not do what they are suppose to do, my client would still be liable for all applicable taxes? I don't want them to have unreported income. That is my concern that the folks that want my client to wacth their kids will not do the right thing. I will advise my client if they don't, do not get involved. Thanks again.

on the employing parents. You can bet they will want SSN for child care credit.

So advise client/kid to keep a record of earnings in case offending employer fails to provide a W2 form. Kid can still enter total as wages but without having to also pay half of FICA.
And of course if no federal withholding during the year, kid should make estimated payments.

The essential point is to have everything nailed down in black and white before employment
commences.

[taxtime]

Thanks

CHEAR$. Thanks for everyone's input

[Burke]

She will be providing the services in the home of the children she will be watching. Should have stated that fact up front. That does make her a household employee. Yeah that is a pretty good income. Beats my paper route. Does that put the burdon on the folks she is the household employee of to withhold taxes (fed Fica etc.)? If I understand it correctly, they can do that but are not required. Sorry for not putting that info in my first post.

Yes it does, at least for the FICA. I have a client in the same situation. She actually lives in the home of the employer. She gets W-2, employer pays 1/2 FICA, deducts her 1/2, and is shown on W-2. They do not withhold federal or state income tax, and my client pays quarterly estimates. I assume the employer pays FICA and FUTA on Sche H at filing time.

[veritas]

Look at the instructions for Sch H

An individual under 18 is not treated as a household employee if the babysitting is not his/her principal occupation.

[Zee]

An individual under 18 is not treated as a household employee if the babysitting is not his/her principal occupation.

Well, that creates another question. Can a taxpayer be a full-time student, and still have a principal occupation? Post note. Pub 926 says if the taxpayer is under 18 and a full-time student, providing Household services is not considered their principal occupation. So, I agree with veritas.

[travis bickle]

who sez?

let's get this straight now. This is a 17 year old kid who will baby sit in another's home?
If so, forget about schedule c. It just doesn't apply. Kid will be an employee and client's
responsible for reporting on schedule h and furnishing a W2 year's end.

why do they HAVE to be a "household employee" for no other reason other than the location of the job?

the irs says: "You have a household employee if you hired someone to do household work and that worker is your employee. The worker is your employee if you can control not only what work is done, but how it is done."

notice the last few words HOW IT IS DONE. if the babysitter sets up the schedule [e.g., tuesdays we go to the park, thursdays we go to a playdate, etc], who is controlling HOW it is done? the babysitter.

i have seen a lot of posts where senior members chime in to the tune of "working in the home? household employee, case closed."

back up your position with something from the service and i will reconsider, but right now let's not forget what is involved with the word "employee".

regards,