Paying an Assistant Less Than $600

[Miss A]

Ok Tom, I have a question. I will be paying a family member for a few weeks this fall while I am easing back into care after maternity leave. I was told that if the amount is less than $600, I do not have to claim it on taxes. Is this correct? If so, how do I go about accounting for where that money went? Do I mark it as payment to employees? Also, do I withhold taxes from this amount paid to the employee?

[Blackcat31]

Ok Tom, I have a question. I will be paying a family member for a few weeks this fall while I am easing back into care after maternity leave. I was told that if the amount is less than $600, I do not have to claim it on taxes. Is this correct? If so, how do I go about accounting for where that money went? Do I mark it as payment to employees? Also, do I withhold taxes from this amount paid to the employee?

"Unfortunately, many family child care providers and tax professionals make this mistake.

They assume that they can treat a person who helps them care for children as an independent contractor because they pay the person less than $600 a year. Wrong."

http://tomcopelandblog.com/does-paying-someone-less-than-600-make-them-an-independent-contractor

[Miss A]

Thank you!

[TomCopeland]

wages

Ok Tom, I have a question. I will be paying a family member for a few weeks this fall while I am easing back into care after maternity leave. I was told that if the amount is less than $600, I do not have to claim it on taxes. Is this correct? If so, how do I go about accounting for where that money went? Do I mark it as payment to employees? Also, do I withhold taxes from this amount paid to the employee?

Black cat is right. The amount you pay someone has nothing to do with paying payroll taxes for employees. You want to deduct the amount you pay as a business expense. But, you must treat non family members as employees. This means withholding Social Security/Medicare taxes, and perhaps paying federal and state unemployment taxes. Report the wages and taxes on Schedule C, under "wages."

[Second Home]

So this is not in regards to daycare but to the $600 and taxes .
My daughter ( 15) was recently hired to work at a karate studio , the manger said they do not file for taxes to be taken out until the employee hits $600 in income . It sounded wrong to me . Is there any repercussions for my daughter for this ?

[spedmommy4]

So this is not in regards to daycare but to the $600 and taxes .
My daughter ( 15) was recently hired to work at a karate studio , the manger said they do not file for taxes to be taken out until the employee hits $600 in income . It sounded wrong to me . Is there any repercussions for my daughter for this ?

If discovered, the IRS will go after the individual(s) who were responsible for paying/withholding taxes. In this case, the employer is responsible for knowing the law regarding employee withholding. I have never heard of IRS going going after a minor for evading taxes.

[TomCopeland]

wages

So this is not in regards to daycare but to the $600 and taxes .
My daughter ( 15) was recently hired to work at a karate studio , the manger said they do not file for taxes to be taken out until the employee hits $600 in income . It sounded wrong to me . Is there any repercussions for my daughter for this ?

Employees must fill out an IRS Form W-4 which allows the employee to claim allowances that will determine how much the employer will withhold in payroll taxes. The employee can also claim an exemption from withholding of income taxes if they meet certain conditions, which a 15 year probably can. This has nothing to do with a $600 threshold.

[jenboo]

Slightly off topic but Tom mentioned non family members. What are the rules for family members. Say my husband and I both run the Daycare. Who claims the income? Do we split it 50/50 on taxes?

[TomCopeland]

hiring family member

Slightly off topic but Tom mentioned non family members. What are the rules for family members. Say my husband and I both run the Daycare. Who claims the income? Do we split it 50/50 on taxes?

If you hire your husband you must withhold Social Security/Medicare taxes. In some states you would have to pay state unemployment tax and you may have to purchase workers compensation insurance. He would then have to report the money as income. As a result, you don't gain any significant tax benefit. If you do work together you can split the income and expenses and file two Schedule C's so that each one of you can earn Social Security credits.