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Daycare and Taxes All things related to Taxes and running a Daycare post here. Topics of tax exemptions, forms, filings, tax write offs, IRS etc.

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Old 03-19-2011, 01:45 PM
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kimandkathess kimandkathess is offline
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Hello. New here as of today. I was doing some searching for an answer to a question but I am totally lost and am hoping someone here can help me.

I have been a registered family daycare provider in NY state since Aug 2007. I decided last year to become a registerd Group Family daycare provider. I received my license Sep. 2010 to do group.

I had my mom come in and help. I was told by a local office who specializes in daycare related matter (one lady was even a previous daycare provider) that I file a 1099 for her.

I have seen many conflicting conversations saying I can't or can do that.

Well after about 4 months (in december of 2010) things went downhill with the econonmy and my mom aka daycare assistant went back to another job.

Well right now I am paying twice as much in liability insurance because I can have more kids, but in reality I only have 6 daycare kids, not even max for Regular Family daycare.

Well i was thinking of hiring my husband but have yet again a few questions.

Can I accept his help (he would be certified w/ the proper training) but can I technically not give him a paycheck. I would then want to claim all the income as mine. Can I do this? Then I wouldnt have to do payroll, and whatever else I am supposed to do.


I am not trying to do anything illegal. It's just so hard in the economy these days and I want the best scenerio possible for my family. I don't want to have to pay all these extra things just to have my husband...whos in the same household....work with me as a family.

Gone are the good ol' days where a family could have a nice business and not have to treat them like a stranger ya know. Thanks for anyones help.

Katrina
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Old 03-19-2011, 03:03 PM
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Michael Michael is online now
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Welcome to the Daycare.com Forum!
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Old 03-19-2011, 09:12 PM
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TomCopeland TomCopeland is offline
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Default Hiring family member

You are better off having your husband work for you, but not hire him as an employee. That way, no paperwork and no income for him.

The only situation where it does make sense to hire your husband is if your family has a lot of medical expenses that are not covered by insurance (insurance premiums he pays, copays, drugs, etc.). In that case you can set up a medical reimbursement plan. Talk to a tax preparer about this.

I've written an article about hiring family members on my blog: http://www.tomcopelandblog.com/2011/...ve-or-not.html

By the way, you should have treated your mother as your employee and not issued a Form 1099. You should have withheld social security taxes, paid federal and state unemployment taxes and purchased workers comp.
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Old 03-21-2011, 06:36 PM
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kimandkathess kimandkathess is offline
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So then, what you are saying is (just so I am fully understanding here)

I can have my husband do the required training and have him down as my "assistant" on the NY paperwork but not have him as a so called "hired employee" where I pay him a " documented paycheck" each week with all the extra required work comp, medicare, etc.....

But I can have him do the training, down as my assistant, but not pay him at all for it because hes "volunteering" his time? so he doesn't recieve a paycheck to put on taxes and I don't have an expense to write down.

Correct?

Now this next part, I am a little confused on. Could you elaborate why this would be the only situationa that would bennefit us?

~~The only situation where it does make sense to hire your husband is if your family has a lot of medical expenses that are not covered by insurance (insurance premiums he pays, copays, drugs, etc.). In that case you can set up a medical reimbursement plan. Talk to a tax preparer about this.~~
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Old 03-22-2011, 08:49 AM
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TomCopeland TomCopeland is offline
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You are correct.

A medical reimbursement plan works like this. You hire your husband to do work for your business. The work has to be directly related to your business. Keep records showing the hours of work and what he did. You don't have to pay him a salary, so there is not payroll taxes. Set up a medical reimbursement plan through a company (ask your tax preparer for referrals). The plan offers him compensation for his work by paying for all of his family's uninsured medical expenses (insurance premiums, co-pays, eyeglasses, etc.). You aren't changing medical insurance companies. You are just flowing these medical expenses through your business as an employee benefit. Now you can deduct these medical expenses as a business expense.
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Old 03-28-2011, 08:52 AM
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Thank you so much for all of your help!!
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