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Ali1
Mommy
Member since 8/05 3116 total posts
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Tax Question Regarding Childcare...
Was wondering if anyone can help me. We are contemplating hiring a nanny when our babies are here. I heard a lot of people pay these people off the books...however, isn't it beneficial for me and DH to pay her on the books....like don't we get a tax benefit by paying for childcare??
I can't figure out why people would pay them off the books though if this is true.
Any help is appreciated.
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Posted 3/30/06 11:03 AM  |
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MsG
Should be working
Member since 5/05 2824 total posts
Name:
G
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Re: Tax Question Regarding Childcare...
I think there are two ways to save tax $ on childcare: the pre-tax savings accounts (like a flex spending account) and then a tax write-off at the end of the year.
I guess some people still come out with more $$ if they don't claim their provider but this doesn't make sense to me either. Plus I always feel weird not doing things legally.
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| Posted 3/30/06 11:05 AM |
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CookiePuss
Cake from Outer Space!
Member since 5/05 14021 total posts
Name:
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Re: Tax Question Regarding Childcare...
You can use pre tax or post tax money but not both. There are limitations on the amount you can use as a credit and it is phased out at higher levels of income. It isn't a very big credit or deduction and covers very little in terms of the actual cost of child care.
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| Posted 3/30/06 11:09 AM |
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dpli
Daylight savings :)
Member since 5/05 13973 total posts
Name:
D
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Re: Tax Question Regarding Childcare...
Posted by Ali1
I can't figure out why people would pay them off the books though if this is true.
I think if you pay them on the books, you might have to be concerned with paying employment taxes and/or Social Security. Maybe most people don't understand this enough to actually do it, or don't want the hassle?
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| Posted 3/30/06 11:10 AM |
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DjPiLL
Member since 5/05 3664 total posts
Name:
Richard
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Re: Tax Question Regarding Childcare...
Posted by dpli
Posted by Ali1
I can't figure out why people would pay them off the books though if this is true.
I think if you pay them on the books, you might have to be concerned with paying employment taxes and/or Social Security. Maybe most people don't understand this enough to actually do it, or don't want the hassle?
People that are paid off the books (cash) usually make less than people on the books. Paying them less is the main reason why people go off the books.
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| Posted 3/30/06 11:19 AM |
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nrthshgrl
It goes fast. Pay attention.
Member since 7/05 57538 total posts
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Re: Tax Question Regarding Childcare...
Posted by dpli
I think if you pay them on the books, you might have to be concerned with paying employment taxes and/or Social Security. Maybe most people don't understand this enough to actually do it, or don't want the hassle?
This was my take on why people do it this way too. I believe you would be considered an "employer", and would need to contribute to Social Security, disability, unemployment insurance, etc.
My old neighbor did it legally - and was shocked at how much it cost. He also added his nanny to his car insurance since she was driving the kids. It went up because she was under 25.
The other reason is many nannies don't want to pay income taxes on their earnings or aren't working in the US legally.
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| Posted 3/30/06 11:35 AM |
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