Can someone please tell me...is this legal?

Question

I have 2 kids that a friend of mine watches before and after school. I pay her $150 a week. My Dad told me a long time ago that this was perfectly legal as long as neither of us claimed it on our taxes. I have never questioned it before...but I want to make sure. Can someone please tell me? Please only answer if you know what you are talking about. Thank You!

Answer 1

Your Dad lied to you!  It's totally ILLEGAL.  He was just teaching you how to not get her caught!  ALL income is supposed to be reported to the IRS!!  

Answer 2

it is not legal.  You are required to claim the income.

You are a TAX cheat !!!

What your dad meant was that is neither of you claim it, it is very hard for the government to know.

But it is still illegal and immoral.

ALL income, unless specifically exempted, must be reported accord to the tax las.  You worked as an independant agent and collected income.

Report it.

Answer 3

If your Dad is an accountant, listen to your Dad.  If not, consult with an accountant or tax preparer.

You are confused with the answers here because you cannot tell who is qualified to answer your question.

Answer 4

yes it's legal as long as neither one of you guys repot it and you feel comfotable with your friend watching them your fine.

Answer 5

It is perfectly legal.  A person can legally watch ONE family of children, no matter how many children, without a license.  As long as she isn't watching other families children, it is legal. Of course, her own children wouldn't count as another family....so even if you did claim it on taxes, you wouldn't get in trouble (unless you don't have a paper trail and get audited).

You may also want to check out your individual state's filing laws because states vary.  The federal law is, if you make less than $8750 in a given year, you do not have to file.  So if this is the only income your provider is bringing in, she shouldn't to claim the income and you wouldn't need to claim it either, unless it effects the amount of your return and you'd prefer to claim it...if she is adding this to another income she already receives, bringing her annual salary about $8750, she would have to claim it, but you wouldn't need to...again, unless it gives a bigger return and then it would be in your best interest.

Answer 6

You do not have to cliam the money on your taxes.  However, there may be a tax deduction or credit that you are missing out on.

Your friend DOES have to claim the income.  The Tax Code defines income as 'income from whatever source derived'  I know, it isn't the best definition, but it means that whatever money you have coming in MUST be claimed as income unless there is a deduction.

As far as I know, there is no 'babysitting for friend' deduction

Answer 7

nah, its not really ilegal, its very bad perenting though, but hey, its your choice        =]

Answer 8

of course you can claim it on your taxes. There is a special form and it takes it right off the top. BIG difference in your refund too!

Answer 9

Its perfectly legal for her to watch your kids. Just think of it as letting your kids play at a friend's house for a few hours a day. Nothing illegal about it.

The questionable legal aspect is the unreported income. As someone already mentioned, $150 per week, for 52 weeks is $7800. If your friend is not reporting that on her income tax, then that aspect is illegal. You cannot get in any trouble in this situation because it is not your responsibility to know what she does with her own money after you pay her for babysitting.

Money spent on child care is tax deductible. This means that you are legally entitled to write off that $7800 per year on your income tax. All you would need to do is fill out the proper forms and send them in with your taxes. You should also be prepared to show documentation that you paid the money, and be prepared to prove that the money was in exchange for child care. This would protect you in an audit, although if you are audited and you don't have sufficient proof, you won't go to jail, you just won't get the tax deduction.

If you don't claim the deduction, then there is no way the government will ever find out what you are doing. If you do choose to take the deduction, there is a very slim chance that the IRS would track the deduction and notice that your friend didn't report the income you claimed to have paid her. If this happens, She could be investigated for tax evasion. For a petty case like this, its likely she would only have to pay back-taxes and a moderate fine, although it could end up on her criminal record. All of this could be avoided if your friend just includes the income when she files her taxes.

Again: if you are willing to skip the deduciton, then there is virtually no risk of your friend being caught. I think pretty much every american has accepted some money from some source that they didn't report on their taxes. I wouldn't worry about it.

Edit: one more thing I'd like to add: there is absolutly nothing illegal about skipping a tax deduction. If you choose to omit a potential deduction when you file your taxes, it just means you will pay more in tax. There's no law against that.

Answer 10

The IRS wants you to claim all income.

If it is money that is used to feed and care for the child it is not income for the sitter.

Answer 11

everthings legal unless you get caught

Vote Best

Answer 12

It's not legal. You are paying a person for a service. You should claim that money for child care services and they need to claim that money as income. You father figured if no one reported it the IRS would never know.

Answer 13

I'm sorry, but your Dad is mistaken.

$150 a week adds up to nearly $8000 a year in unreported income for your friend. The IRS would like to tax that income, but unless you deduct the amount you pay to her as child care expenses on your tax return, they'll never know about it.

Answer 14

As long as you dont get caught tax evasion is a big thing

Answer 15

I think the question is one of ethics.  The parent should be taking deduction on their taxes, but must have the caregivers tax id number for that.  This would mean that the caregiver would report it as income and the payor would show it as a cost for childcare.  I think that is the real question.  Ethically, income should be reported.  There are legal ways to offset the income if the caregiver is afraid of paying too much in taxes.  A good tax preparer or accountant she be advising both of you.

Answer 16

No.  That money should be taxed by the government and redistributed to the people who never earned it to begin with.

EDIT:  I was just being smart allecky.  Smart A$$ is mostly right, although I think as the employer of an independent contractor, you will need to prepare a form 1099 and deliver it to her.  And you couldn't deduct the whole $7800 (which I guess is an overstatement of the amount since I'm sure she isn't keeping your kids 52 weeks per year).  You can deduct $3000 for 1 child or $6000 for two or more children.

Answer 17

You can declare that money on your State taxes and get some of it back.

Answer 18

Your dad is right, just think about all the times a teenager babysits and gets paid for it, it legal