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Financial Planning / Tax Strategies


Subject:  Re: Self employment tax Date:  6/23/2006  10:16 AM
Author:  pussinboots1 Number:  87532 of 127549

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.

One thing you might consider is to simply have the brother pay his share of the activity expenses. I'm no where nearly as knowledgable as some of the other posters here, but this seems quite far removed from a typical "business income" or even "other income" situation. It sounds like what's really happening is that you're doing a favor for the brother. You're not making any money on this arrangement, and if it's treated as an income situation (e.g. brother paying DW $5/hour for daycare services), you'll be even more in the hole because you'll now have to pay taxes on that "income."

Here's what I'd do: (1) tell the brother that you won't accept compensation for your time & services, but (2) you expect him to pay his fair share of the direct costs of taking care of the kids (food, auto expenses, entry fees, etc.). I think this is a much better representation of what's really happening here. It also eliminates tax complications. I see this situation as being similar to when friends eat out together, one of them pays with a CC, and the rest of them each chip in their share of the bill. Or, when a few friends go on a road trip, and chip in for car expenses. Ultimately, what you'd like to happen in your situation to keep things simple is for the kids to pay for their own expenses. 'course, this is unrealistic, so their parents should pay for those expenses. Due to the fact that the parents aren't physically with the kids when the payment for expenses happen, DW pays. But, that doesn't mean that you need to get the IRS involved. Just have the brother give you a "slush fund" of monies that are to be used for the kids' expenses, or something like that.

My 2c,

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