Ok, I just moved a friend down from Montana to watch my kids. We will be paying her around $400 a month, plus room and board.
Do we need to do any sort of tax stuff for this? I don’t care if I have to claim it or not, I’m still going to do it 'cause she’s my friend and I care about her, but we are curious as to the tax thing.
If needs be, she’ll just be a roommate, and live under the table, so to speak.
Advice, tax dopers?
Do a search on “nanny tax”. That’s the common name for it.
Here’s a cute calculator to figure out the amounts: http://www.smartmoney.com/tax/calculators/index.cfm?story=nanny
If you pay $100 a week, it comes out to $645 a year for Social Security, $151 a year for Medicare, plus some money for unemployment tax. You pay the taxes on your normal tax return. You don’t have to withhold.
On the plus side, if you (and your spouse, if married) work and or go to school, you will probably be able to take the child care credit. Check out
http://www.irs.ustreas.gov/prod/tax_edu/faq/faq-kw30.html