Comments on: Ask the taxgirl: Babysitter Bonus

By: Ask the taxgirl: Deducting Gift Cards | taxgirl

Ask the taxgirl: Deducting Gift Cards | taxgirl — Wed, 03 Jun 2009 00:51:24 +0000

[...] For specific information on holiday gifts and bonuses, see my prior post on the subject. [...]

By: Ask the taxgirl: Lotto Winnings & Other Income

Ask the taxgirl: Lotto Winnings & Other Income — Sun, 04 Jan 2009 05:19:29 +0000

[...] believe that the money that you receive at Christmas is taxable. It is not really a *gift* (read more about gifts and bonuses here). It’s an acknowledgement of good service. In that way, it’s like a bonus or a tip. And [...]

By: Kelly

Kelly — Fri, 19 Dec 2008 14:34:08 +0000

Joel,

The statute (section 119, I think) specifically excludes the room & board from income, so you shouldn’t record it as taxable income. Since there’s no corresponding expense, there should be no credit or deduction.

I think the distinction is that this is not meant to replace otherwise taxable income (meaning the rental), it supposed to be something for the convenience of the employer.

By: Joel

Joel — Fri, 19 Dec 2008 05:58:24 +0000

OK, with the value of room and board for a live-in nanny, it is excludable from her wages; but what does it mean for the parents? Are the parents allowed to claim child care credit from providing the value of room and board?

To complicate the matter just a tiny bit, would the parents have to recognize this as a taxable event and record an income, where the parents would have normally rented out a space in their home for rental income, but in this scenario, is bartering rental space in exchange for nanny services?

Thank you for your previous reply.

By: Cash Gifting Forums

Cash Gifting Forums — Fri, 19 Dec 2008 03:44:47 +0000

What if you have a live-in nanny, would letting her live rent-free in exchange for babysitting be consider a tax-free benefit?

By: Kelly

Kelly — Fri, 19 Dec 2008 00:42:47 +0000

You are absolutely correct. For federal purposes (state tax laws may vary) you can exclude the value of room and board for a live-in nanny if:

1, It’s at your home (and not, say an apartment down the street);
2, For convenience purposes; and
3, It’s a condition of employment.

With respect to meals at your home, it doesn’t matter if the nanny is live-in or not, it’s still exempt since it’s primarily for your convenience. The nanny can’t just leave during the day to go get her own food – who would watch the kiddos?

By: Joel

Joel — Fri, 19 Dec 2008 00:12:05 +0000

What if you have a live-in nanny, would letting her live rent-free in exchange for babysitting be consider a tax-free benefit? I recalled reading something that if it is for the convenience of the employer, housing (and meals) expenses are not taxable to the employee.

Joel

By: Ask the taxgirl: Gifts to Spouses | taxgirl

Ask the taxgirl: Gifts to Spouses | taxgirl — Thu, 18 Dec 2008 05:14:46 +0000

[...] here you go… My answer is yes. As I pointed out in a prior post regarding holiday gifts, the general idea of a gift is that you’re making it out of “love and [...]

By: Stacy

Stacy — Tue, 16 Dec 2008 15:35:35 +0000

Great article. I just wanted to mention that there is not only potential trouble with the IRS, but also beware of your state unemployment commission. The problems usually begin if an ex-babysitter decides to file for unemployment benefits. Also, at least here in Texas the unemployment commission audits quite frequently. At that point you will be glad that you handled all payments to her properly!

By: Brian

Brian — Tue, 16 Dec 2008 14:49:47 +0000

If you go with option 1, your accountant should easily be able to determine what the employee’s gross pay (before taxes) should be to arrive at the net pay you’d like the babysitter to end up with. (i.e., it shouldn’t be too expensive to have him do this)