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Financial Planning / Tax Strategies


Subject:  Re: Self employment tax Date:  6/22/2006  7:19 PM
Author:  TMFPMarti Number:  87524 of 127549

My DW has been watching my brother's kids a few days a week lately, and it will end up being all summer. She is doing this so my brother's wife can go back to work. They pay her a little something (I'll stress little), but by the end of the year, I could see it being $1000-$1500). On the flip side, my DW drives the kids around to all their activities, and pays for lunches, pool fees, and some periodic fun things like the water park.

Question: When they're not out having fun, where does the watching go on--your house or your brother's? This matters because IMO it weighs heavily in determining whether your wife is self-employed or a domestic employee in your brother's home.

We have no problem with the wasn't a "for profit deal" for us, but my brother would like to give us a 1099 for the income.

This is inappropriate no matter what the answer to my question is. If your brother has a household employee, he reports those wages on a W-2 and Schedule H of the 1040. If your wife is self-employed, your brother need only show her SSN and other identifying information on Form 2441, where he claims the childcare credit. 1099's are for business expenses.

No problem there either, but if he does, should my DW track all her expenses, so we can deduct all the mileage, fees, lunches, etc.? If not, we are really going negative on the deal, since the payment really only barely covers what we spend.

Regardless of whether she's self-employed or an employee, your wife needs to keep a record of her expenses.

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