If you report your babysitting income, how much taxes

amother

Mon, Jun 03 2019, 9:09 pm

Hi. If you report your income as a babysitter are you paying double taxes because you are self employed?

Basically, I have a masters in an area which is quite flooded. Jobs are hard to come by and do not pay well at all. I really love little kids, and I would probably enjoy it more than my current job.

I am just trying to figure out what is more worth it. Currently now with my child tax credits and refunds I've been receiving, I basically got back whatever I've been paying in taxes. Does any w know how it works with babysitting? Can you get a refund? Or you are basically paying 15 to 20 percent plus in tax with no credit or return. Now I pay 10 percent but with 2 dependants and low income I get it all back

I know many posters will say to ask my accountanct. I will, but just trying to get a general picture....

mig100

Mon, Jun 03 2019, 9:16 pm

your question is quite confusing. im not sure what you mean- though I do think you are mixing up some basic facts.

1) you do not pay double taxes. if you are self employed you pay double social security tax ( which is .0725 I beleive) I think thats what your referring to. assuming you have the same amount of taxable( which I higly doubt that you will) income- this should be th only difference.

2) your income taxes- will depend on many things - no one can tell you "if you babysit- you will pay more/ less / the same amount of taxes"

3) if you are self employed- which you will be if you babysit- you can deduct work related expenses. which reduces your income.

the only way to know exactly how much taxes you will owe/ get back- would be to take the actualy numbers ( income, expenses, other deductions ) and do the calcualtion.

I dont think there is any other way to konw

amother

Firebrick

Mon, Jun 03 2019, 9:23 pm

To recap what the other poster said, the only difference between someone who is self employed and someone who is not is thst they pay both portions of the ss/Medicare tax, which both together is currently 15.3% (whereas employed people pay only 7.65% and their employer pays the other 7.65%). So you'd be paying 7.65% more than if you would have been employed. Do bear in mind that you can deduct eligible expenses on your schedule c when you're self employed. Just make sure to have all receipts and proof as well as proper proof of income (deposits to your bank etc).

mig100

Mon, Jun 03 2019, 9:41 pm

amother [ OP ] wrote:

Thanks firebrick. If now I get back most of the 7% of taxes I paid, if I am self employed with the same Iincome at the end of the day( which is a lot more really because I pay 700 in babysitting now)does the same apply....? Tx

Ur confusing a lot of things. U don't get back the 7%. That is non- refundable I believe.

U get a separate earned income credit

So u get bac k as much as u pay. Though if u look at breakdown on tax return u always pay the 7/ 15% social security tax.

Mommyg8

Mon, Jun 03 2019, 9:44 pm

mig100 wrote:

Some credits (such as the child tax credit) are partially refundable. Which means that you can get back more than you paid. It does go towards social security tax.

amother

Coral

Tue, Jun 04 2019, 4:50 am

Not much to do with self employment but depending on what type of business you made it you actually may be paying double. It's what I do and it's worth it for me because this way I qualify for some programs (throw all the tomatoes you want but it's legal).

If it's an LLC then you pay taxes once. If it's a c- corp (like mine) than you pay one tax on the buisness and one tax on your salary.

amother

Firebrick

Tue, Jun 04 2019, 5:26 am

amother [ Coral ] wrote:

It's not a must for her to form an llc or a corp. She can just work on her own individual name.

(on the topic of llc' s probably the only way it can save you $ is if you live outside nyc and file it as an S corp. Then you get to save on Fica tax for a portion of your money earned.... But that's if you earn a significant amount, which I don't think applies to OP.)

amother

Firebrick

Tue, Jun 04 2019, 5:30 am

amother [ OP ] wrote:

And like the other posters said, you don't get back your taxes per se, there are just certain credits like earned income credit or dependent credits that are refundable (meaning you get back up to a certain amount even if you don't owe any taxes.) Only an accountant who takes all your info into consideration can figure this out for you as to how much you'd get back.

amother

Coral

Tue, Jun 04 2019, 5:32 am

amother [ Firebrick ] wrote:

Yeah I realized I made a mistake and confused her with another poster who said she made hers into a business.

amother

Seafoam

Tue, Jun 04 2019, 6:47 am

I have a small playgroup.
A few things my accountant told us.
1) there is a former Business Use of the House. It's a complicated form, but small percentages of your rent, gas, electric, water can be filed as deductions and lowers the Gross Income.
2) supplies bought: toys, highchairs, tissues, garbage bags, paper and crayons, freeze pops, all are business expenses if you're car full about saving receipts.
3) advertising costs

There is a portion of health insurance costs that I believe is credited for those who are self employed under certain conditions-worth asking an accountant.

In NJ, medical costs for the family of one self employed can also be used as a deduction for state taxes- again ask an accountant.

But yes, depending on other factors, there have been years I've had to pay up to $1500. But that depended on my husband's job, if we had a new baby, where we sent our kids to day camp (tax Id or not). And this year with the new tax laws, we did much better.

chatz

Tue, Jun 04 2019, 7:18 am

Both my husband and I are self-employed, although not in babysitting.

1) if you are self-employed, you are responsible to keep track and remit taxes. Normally, your employer would pay the taxes on your behalf.

2) taxes: two main types
Income tax - can be 0%, can be much higher.
Self-employment tax- Normally, your employer withholds 7.65% and pays an additional 7.65%. when you are self-employed, you have to pay the entire 15.3%, less a deduction. Effectively, somewhere between 14-15%.

3) business deductions. Your gross income is reduced by applicable business deductions. Ex: salary paid to an assistant, supplies/food used for babysitting, baby equipment, rent (specific rules if you use part of your house), licenses, bank fees. Anything specifically related to your business. You only pay taxes on the net income, after taking off those expenses. Keep your receipts. Ideally, have a separate business bank account.

4) refundable credits. These are the only tax credits that can offset self-employment taxes. Specifically, earned income credit (if you qualify) and up to 1400 of the child tax credit per child.
Nonrefundable credits can offset income tax, but not self employment tax.

Deductions: reduce income
Nonrefundable credits: dollar for dollar credit against income tax owed. If it's more than your income tax, that excess is not given to you.
Refundable credits: dollar for dollar credit that gets paid to you if it comes out more than your income taxes (or applied towards self employment taxes)

Look for a tax calculator online and play around with the numbers, estimating how much you think you will make, how much business expenses you can deduct, and your husband's income, to see what the tax effect would be.

mommyX2

Tue, Jun 04 2019, 9:01 pm

ddmom wrote:

What could be work related expenses for babysitting in your own home?
I see 2 posters mentioned that. Can you give me examples please?

anything you buy for taking care of the kids, diapers, wipes, toilet paper, tissues, water, cups, plasticware, toys, chairs, tables, art supplies. you can also pay yourself rent and figure out a percentage of cleaning help/lawn care/ utilities. ask your accountant about this.