General Question

awilliamson86's avatar

I made less then $4,000.00 last year babysitting but got paid under the table now she wants to claim it on her taxes but would I have to pay taxes on it?

Asked by awilliamson86 (14 points ) January 27th, 2013

Last year I babysat for a lady and made less then $4,000.00 but now she wants to claim it on her taxes as a childcare write off but I want to know if I would have to pay taxes or a self employment taxe? Thanks any information will help as she did not tell me this when I first started.

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43 Answers

glacial's avatar

It depends on what the maximum you can earn without paying taxes is in your state/country. I would guess $4000 is too little income for you to pay tax (assuming this is your only income). If so, you can happily give her a receipt. If not, I guess you will have to weigh what you would pay in self-employment taxes against the possibility of not being hired by that parent for babysitting in future.

wundayatta's avatar

If she uses it as a write-off, then you need to report it to the IRS. If it is the only money you make, you probably won’t owe any taxes. However if you have other sources of income, you may owe taxes.

cazzie's avatar

If you didn’t give her a receipt for it, she can’t claim it, I don’t think. I don’t know what the limit is now for no tax, but if that is all you earned, I don’t think you would need to pay taxes on it, but you would claim it and have to file. Oh,,.. here is what wiki says… (aat 2011 federal income tax kicked in at $8,500.

http://en.wikipedia.org/wiki/Rate_schedule_(federal_income_tax)

zenvelo's avatar

Look at it this way: your tax liability will be nil, but hers just went way up. Act as if you were not a contractor but an employee, and ask for a W2. And ask for a statement of how much she withheld and paid in Social Security.

awilliamson86's avatar

My boyfriend if claiming me on his taxes because i made so little so how would this affect him in any way?

glacial's avatar

@zenvelo Well, sure… but does she ever want to talk to this woman again? ;)
Presumably, this is a working relationship that the OP wants to keep in future.

@awilliamson86 It can be a bit of a hassle filing self-employment income – make sure you know what’s involved in your state or country before making a decision.

CWOTUS's avatar

If I were you I would do nothing. Nothing at all. If there’s a filing requirement, then you’ll hear from the IRS in time (maybe years from now), and you can pay the taxes owed (if any) at that time. There will be little or no penalty.

Ignore this.

In fact, if your “employer” is going to report this as any kind of wage thing, then she’s opening herself to more liability than you, since she’s not withholding tax, FICA and Medicare, she’s not deducting that from what she pays you, and she’s committing a long list of “employment” violations.

Aside from this, if she doesn’t have your Social Security number (she doesn’t, does she?) then there’s no reference for the IRS to even contact you.

Sleep tight.

awilliamson86's avatar

@cwotus no she doesnt have my ssn but she wants it and I also wants to know if it will affect my dshs i am getting for my daughter?

cazzie's avatar

Yes, the employee argument is one thing, but you may also been seen as a self employed contractor, in which case, you would have, again, had to issue a receipt. You did not, therefore, I don’t think she can claim the expense. The onus is on her, really. UNLESS, she paid you by check. I think in some areas, cancelled checks are considered just as good, but if it was cash, you really are in the clear on all fronts.

glacial's avatar

@awilliamson86 Just out of curiosity (since it’s hard to tell from what you’ve posted). Are you a student? Do you live with your boyfriend? Are you allowing him to claim you as a dependent because you know that’s the best option for both of you, or are you doing it because you trust him to make the decisions?

I would strongly suggest that you learn about the relevant taxes for your region and situation, and what the benefits are for you to file your own return. It’s important to know this stuff.

For the present situation, @CWOTUS and others are right – you are under no obligation to provide your employer with a receipt or your SSN. You would be doing it strictly as a favour to her. If you feel that it would complicate your life, just tell her no.

awilliamson86's avatar

@cazzie she paid me in checks and some times cash. but she keeps hounding me for my ssn so what do I do.

@glacial I live with him and he pays all the expenses thats why he is claiming me cause I work for this lady full time but get 20.00 a day so I dont know what to do

cazzie's avatar

You work full time for only $20,00 a day? How many rules does this woman want to break? That isn’t even minimum wage, and if that is all you earned all year, you will have no tax obligations. Nor do you have an obligation to her for, to my mind, exploiting you to a ridiculous degree.

awilliamson86's avatar

@cazzie yes I only made $20.00 a day and that is why I quit and I just want to make sure I wont have to pay anything back or it will mess with my dshs stuff because she keeps hounding me for my ssn and I dont know what to do.

cazzie's avatar

If you quit as well and will never be working for her again, tell her nothing and don’t worry about it. If she is ever audited, the tax department won’t be looking for you, they will be disallowing her deduction and she will owe more tax. ($20.00 a day wouldn’t even cover meal reimbursements or travel reimbursements that you could say, what ever checks she could track down as proof of payments, you accepted and that you were not employed or contracted, but just did the child minding to help her out, if anyone ever asked.)

awilliamson86's avatar

@cazzie I cant quit right now till I find a new job so right now I am at a point of what do I do

CWOTUS's avatar

Don’t give out your Social Security number to anyone but legitimate employers (at the time of employment) or the relatively few others (such as creditors, for example) who have a legitimate need for it. If she has been employing you for some time without a bona fide employment situation (pay based on hours worked, time reporting requirement, tax withholding and matching payments on the part of the employer, etc. – as well as legal minimum wage and hours of work requirements), then it’s too late for her to ask for it now. Just decline.

awilliamson86's avatar

@CWOTUS I have declined her several times and she keeps insisting for it and insisting that I wont have to pay taxes back at this point i dont know what to do. I am stressed and making myself sick over it

CWOTUS's avatar

Hang on a bit, and I’ll try to find a reference for you on the topic.

Show her this (from the IRS), with particular attention to the last numbered item, and see if she’s ready and willing to be audited on that little detail.

cazzie's avatar

http://www.dol.gov/compliance/laws/comp-flsa.htm

You can even phone them, and it will be confidential.

JLeslie's avatar

Table 2.2012 discusses dependents. It says if you earned more than $3800 you usually cannot be claimed as a dependent if that is what your boyfriend is doing currently. It also says you don’t need to file if you earned less than $7400, so I assume there is no tax to pay if you are not a dependent.

I’m no expert though.

Did she feed you also while you were there? Since she was paying way under minimum wage you can tell her you will report her I guess? You both are doing something illegal basically.

Is your boyfriend sure you meet the requirements of being called a dependent for federal taxes?

CWOTUS's avatar

You’re welcome. (I hope you notice that I edited the earlier response to show you the reference I was looking for.)

wundayatta's avatar

Your employer may have decided she needs to pay Medicare and Social Security tax for you. If that is the case, she needs your SSN in order to pay. In addition, she gets a deduction for amounts spent on child care, but only if she has a SSN or EIN for the person or entity providing the child care.

I don’t think you need to be afraid of giving your employer your SSN. Unless it makes you ineligible as a dependent on your boyfriends tax return. I think you should ask your employer if she is planning to pay your Medicare and Social Security taxes and that is why she needs your SSN. $4000 seems to pass the threshold at which your employer needs to pay these things. It would certainly have to be above $1000 in at least one quarter.

marinelife's avatar

Yes, if she claims it on her taxes, you are likely to have to pay income tax on it and self-employment tax.

Adirondackwannabe's avatar

If she gives you a 1099 you will need to file a tax return. If your self employment income is over $400 you need to file. You’ll owe $612 in self employment tax. You may not owe income tax. You should probably talk to a professional.

CWOTUS's avatar

I still suggest doing nothing. The IRS can come and find you if they think they need to. They have bigger fish to fry.

Adirondackwannabe's avatar

@CWOTUS If she gives her her SSN the IRS will run it down and come looking for her. They’re amazing in tracking down things when they have a SSN. It’ll take 10 to 11 months, but they will find it.

CWOTUS's avatar

I agree, @Adirondackwannabe. That’s why I suggest not giving the SSN and not filing.

SadieMartinPaul's avatar

If your employer paid $1,800 or more for your services during 2012 (she did), then she’s required to issue a Form W-2 and remit social security and Medicare taxes. She’ll also be liable for unemployment insurance taxes and possibly worker’s compensation insurance premiums; but, that’s her problem, not yours.

She should have obtained your personal information, including your SSN, when she first hired you. She also should have had you complete a Form I-9, Employment Eligibility Verification, to confirm that you’re eligible to work in the U.S.

My take on all this—she wanted to pay you “under the table,” not issue a Form W-2, and not remit payroll taxes. She recently learned that she could claim a Child Care Credit based on your wages, however, so she’s backtracking and trying to fix everything.

It’s worth noting some of the misinformation provided in other posts:

—A household employer isn’t required to withhold any taxes from your wages. In fact, nearly every household employer withholds nothing and, instead, chooses to pay both the employer and employee portions of social security and Medicare tax. This is beneficial to you.

— Your employer’s correct when she says that you won’t owe any back payments for social security and Medicare. She’ll pay the taxes, on behalf of both of you, when she files her 2012 Form 1040.

—This isn’t an independent contractor/Form 1099-MISC situation. You’re an employee in every respect; you’re not a self-controlled consultant or otherwise self-employed.

—Being on the grid isn’t such a bad thing. So, you’ll be subject to income taxation on modest wages of $4,000; depending on where you live and other aspects of your tax profile, your federal and state income taxes may be $0. But, you’ll pick up some social security quarters, and you might be eligible for unemployment compensation if you lose your job. Leaving a job under untenable circumstances, such as being paid ⅓ of minimum wage, is often deemed to be the equivalent of dismissal without cause. Also, if you’re in the open and not hiding your situation, you can report your absurd working conditions and seek justice.

JLeslie's avatar

@SadieMartinPaul What about the fact that her boyfriend is claiming her as a deoendent? Is it irrelevant? Also, she receives some sort of medicaid. I am not clear on that. If she is a dependent then I am not sure how exactly she qualifies for medicaid?

Adirondackwannabe's avatar

@JLeslie I think she can make $4500 without owing income tax, maybe a little more this year. But I think medicaid may take into account household income, in which case she might have a problem.

JLeslie's avatar

@Adirondackwannabe The info I linked was not over $3800. Hopefully @SadieMartinPaul knows for sure. The medicaid would depend on state law I would think.

Adirondackwannabe's avatar

@JLeslie I can check tomorrow when I get in to the office if she wants. I have a couple of guides there. I think you’re right on the medicais law.

SadieMartinPaul's avatar

@JLeslie I won’t provide tax advice at a casual, internet message board. I can, however, provide general information that might be helpful, and I’m always happy to do so.

Now that I’ve taken care of the disclaimer…

Yes, the gross income test for dependency is $3,800 in 2012. @awilliamson86 mentions that she earned less than $4,000 during 2012. If her employer pays her portion of social security and Medicare tax, which is usual and customary in domestic employment arrangements, her employee share gets added to her taxable wages.

@Adirondackwannabe Medicaid is a federally-funded program that’s administered on the state level. Medicaid’s a form of welfare/public assistance; only people with very low (1) assets and (2) gross taxable income can qualify. The criteria vary considerably from state-to-state. In Virginia, a Medicaid recipient generally can’t have more than $2,000 assets and $1,200 monthly taxable income ($14,400 per year).

awilliamson86's avatar

@adirondackwannabe i get state medical so hopefully that won’t mess with it. I just don’t want to have to pay back taxes amd also i get food stamps and state help and i dont want tp have to pay that back. I have two kids and single mom cant afford to pay it back. I live in WA. Thanks

jca's avatar

I’m still on that the OP makes $20 per day. How many hours do you work per day for that?

awilliamson86's avatar

@jca i work sometimes 10–12hr days and she expects me tp watch her kid and clean her house i was doing it as a favor to her but now she is using me

jca's avatar

That is nuts. Totally totally nuts and you are definitely being taken advantage of.

May I ask how old you are? You really need to either advocate for yourself, or have someone do it for you. I would make it clear to her that if she wants to report this income, you have options available to you, such as reporting her to the State Labor Board (or whatever it’s called in your state) for her less-than-minimum-wage and violation of the local labor laws. With a job like this, she’s not doing you a favor by keeping you.

awilliamson86's avatar

@jca ya i know but dont know if i should give her my ssn

awilliamson86's avatar

@SadieMartinPaul she doesnt pay anything but she pays me straight out right under the table and she doesnt pay any taxes. I am on the fence if I should give her my ssn.

JLeslie's avatar

@awilliamson86 How much of your salary has been paid to you by check? Does she write the check to you or to cash?

If you don’t want to give her your SSN number maybe ask her why all of a sudden she wants to report the money she has paid you. You can ask if she plans to pay your social security taxes.

You can also ask how she would explain to the government that she pays you slave wages if she is so worried about reporting what she has paid you. But, that will obivously be confrontational and the whole thing could get nasty.

You are severly underpaid @jca is right, but forget that you are simply underpaid from an ethical standpoint, you are underpaid according to the law. I think you can use that to get her to back off. But, you will probably lose your job also.

I doubt $4,000 would mean you lose your medicaid and food stamps, if only your salary is counted for medicaid and food stamps and not your boyfriends. Here is the eligibity websate for WA.

cazzie's avatar

My argument is that she is NOT employed but the lady reimburses her for the odd expense, like meals and travel. You can NOT work a 10–12 hour day and earn $20.00 a day. That is complete and utter exploitation and that woman is breaking the law by even trying to claim that piddley sum on her taxes. I would report her to the Labour Department if she lived in New Zealand, but I am sure there is an equivalent in the US. She has no right to claim that cost on her taxes. End of story. I would absolutely phone the department of labor’s free, confidential help line.

WestRiverrat's avatar

You state you have a child, you should file your own tax return regardless. You are probably eligible for the child earned income tax credit. And you have enough deductions that you will not have to pay any taxes.

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