Paying My Mom

[EchoMom]

I have been operating my business for a year. My mom has now joined me to work with me full time in my daycare. We are going to split the money 50/50 How should I handle this with taxes? Do I claim all of the daycare income? Do I claim only 50% of the daycare income? Do I deduct the money she earned as paying an employee? But it's 50/50 because she's not an employee, she's my equal partner. How does this work?

[TomCopeland]

I have been operating my business for a year. My mom has now joined me to work with me full time in my daycare. We are going to split the money 50/50 How should I handle this with taxes? Do I claim all of the daycare income? Do I claim only 50% of the daycare income? Do I deduct the money she earned as paying an employee? But it's 50/50 because she's not an employee, she's my equal partner. How does this work?

You have these choices:
1) Hire her as your employee and pay all the payroll taxes, unemployment, etc. You can then deduct 100% of these expenses. You can make decisions jointly.
2) Form a partnership. Split income and expenses. File partnership tax returns. If you do this you will lose the ability to depreciate your home.

In my opinion, choice 1 is the best and simplest. For more info: http://www.tomcopelandblog.com/employees.html