Anyone an accountant...I need advice

LJGZsmom · **Anyone an accountant...I need advice**

Anyone here an accountant? I need your advice. I am going to call my accountant and a couple others and get opinions. And of course any advice you all have is welcome.

I babysit my sister's kids. She pays me in cash each week. I don't pay taxes on the money and she doesn't claim child care on her taxes. She was told by her accountant that she would have made $1200 more this year on her return had she paid for child care. So she said she is claiming it next year. I am not sure how this will work or how I feel about it. If she claims paying me, then I have to pay taxes. In her eyes it is better for me because then I get more money back since I have a paying job. But I am not so sure since I will have to pay on it. I won't get the full amount she gives me now. My husband and I get a really good tax return every year and I really do not want to mess that up. We depend on that return for vacation and bills.

Now I know that I can keep reciepts like grocery, phone bill and anything related to having to watch kids. I also know it would be like a job so I could get a little more back. I guess I am just worried about messing up our returns and not getting as much back. I like the way we do it. And I don't believe that she would have gotten back an additional $1200 either.

My husband said if we do this we will just charge her more to balance it out for us. He also told me to explain to her that what I save her (compared to the in-home daycare she paid before I started watching the kids) a year is MORE than that $1200 she "would have" gotten back. Plus I don't take the three weeks PAID vacation a year and all of these other days this lady takes off paid a year. I think if she really sits down and looks at that she might not be so eagar to do it.

If it would honestly help me maybe get more money back at tax time and she would pay me more so I still get the full amount I am currently getting, then I would probably say let's go ahead. Anyone have any thoughts on it? Thanks!

DebbieL · 03-07-2008, 12:57 PM

Like anyone who works under the table the rate is cheaper because you aren't paying taxes on it. In other words, if she wants to make it "official" and on the books - then your rate goes up (say 20-30% - whatever is at LEAST enough to cover the extra tax expenses).

mabennett · 03-07-2008, 01:42 PM

how is she claiming it when her children are not in a certified facility? i had a lady come to my house for one of my children and my accountant said i couldn't claim child care because she wasn't certified in the state of texas. interesting. if she wants "more $$" in her pocket, then she should pay you "more $$" for your inconvience. day care is out the wazoo and she'd better thank her lucky stars that she has such a good deal!

LJGZsmom · 03-07-2008, 01:57 PM

Yea, I just sat and did the numbers and called our accountant and talked to my mom (who is very neutral). If I take what she paid the other sitter a year and subtract what she paid me in a year it is a $1560 difference. The accountant told her she could have gotten $1200 more back on taxes. So by not claiming it she got more. Because if I let her claim it, then I WILL charge her the same she paid the other sitter. Period. And she would pay it, that is my sister, she spends money like it is going out of style and doesn't bat an eye.

In the state of Kansas I honestly have no idea if she can or can not claim it if I am not certified. But I know I will not get certified. In Kansas you have to take classes, they can tell you to take on more kids, I am not going through that. I have my own kids who I homeschool. I only started this because she lost her sitter and I needed a little extra money. It worked for both of us.

I mean, if she can claim it with me not being certified, AND it helps me as far as my tax returns, then I really might do it. I just don't know. Guess I need to find out if she can.

terrisirig · 03-07-2008, 06:15 PM

Your sister can claim a deduction on what she pays out in childcare and use that money as dependent day care expenses...which are tax free...this is how she would save $, I used to do this when my children were in daycare. In MA, the childcare has to be licensed, the license # goes on the tax return, and that is how they can cross check it with yours. If you explain to her that you will be charging more, I think she will see that she will not save any $ at all. There is a reason that people try to get away with this, the amount they save in taxes is usually not worth the extra they pay. Good luck, family matters can get sticky.

MegNAbbysMom · 03-07-2008, 06:38 PM

Well, unless you have A LOT of expenses from babysitting, you will have to pay taxes on the profit along with self-employment tax. I agree that you should tell her you are raising your rate to compensate for what you have to pay in taxes. Good luck!!!