Any tax pros out there? (sales, rental, daycare)

[lenniel]

A couple of quick questions:

1) we pay a nanny cash every week and do not take out any taxes nor do we provide any benefits other than time off with pay. I don't know if she pays taxes on these earnings or not. I don't believe she has a social security card. Can I deduct any of this?

2) I work in sales but have a home office. What can I deduct from the home office?

3) What are some other common deductions that people miss?

I got hit by the AMT last year to the tune of 4 digits and I did not enjoy that. Want to avoid it this year.
Thanks in advance.

[Avengerfire]

It sounds like you need to hire an accountant.

[mr aztec]

Originally Posted by lenniel

A couple of quick questions:

1) we pay a nanny cash every week and do not take out any taxes nor do we provide any benefits other than time off with pay. I don't know if she pays taxes on these earnings or not. I don't believe she has a social security card. Can I deduct any of this?

2) I work in sales but have a home office. What can I deduct from the home office?

3) What are some other common deductions that people miss?

I got hit by the AMT last year to the tune of 4 digits and I did not enjoy that. Want to avoid it this year.
Thanks in advance.

Does the nanny come to your house? You are likely her employer and should be withholding. I'm sure quite a few people ignore this, but if you want to be compliant, I would talk to an accountant. Your nanny probably won't like the idea of withholding, but its the law. Try MSN's money forums--tax. Do a search, you can learn a lot more there.

[softdev]

1) we pay a nanny cash every week and do not take out any taxes nor do we provide any benefits other than time off with pay. I don't know if she pays taxes on these earnings or not. I don't believe she has a social security card. Can I deduct any of this?

Just the opposite. You are her employer and owe money.

2) I work in sales but have a home office. What can I deduct from the home office?

Depends. Do you have an office at your employer? What percentage of time is your office used for work vs. personal?

You need some help from an accountant. This isn't brain surgery and it can be easily done with out one, but you are struggling on the very very basics. Are you applying to be treasury secretary or something?

[lenniel]

Originally Posted by softdev

1) we pay a nanny cash every week and do not take out any taxes nor do we provide any benefits other than time off with pay. I don't know if she pays taxes on these earnings or not. I don't believe she has a social security card. Can I deduct any of this?

Just the opposite. You are her employer and owe money.

2) I work in sales but have a home office. What can I deduct from the home office?

Depends. Do you have an office at your employer? What percentage of time is your office used for work vs. personal?

You need some help from an accountant. This isn't brain surgery and it can be easily done with out one, but you are struggling on the very very basics. Are you applying to be treasury secretary or something?

I have an accountant I work with in NY and I'm just trying to get everything prepared so we don't have to do a lot of back and forth. I procrastinated this year and I know he's slammed so I'm hoping to avoid further delays for him.
And....even though I'd probably do a better job than Geitner, I think I'd get bored in that job. He's obviously either bored or over his head.

[janetvj]

The other posters are correct - the nanny is your employee and you should be withholding income tax and paying unemployment.

Forms 941, 940, Employment Taxes

Question: We hired a nanny to look after our baby while we work. How do we pay her social security taxes and properly report her income?

Answer:

A nanny is considered a household employee:
A household employer only has to pay social security and Medicare tax only for the employee(s) that receive cash wages that exceed the threshold amount for the year.
If the amount paid is less than the threshold, no social security or Medicare tax is owed.
If social security and Medicare tax must be paid, you will need to file
Household Employment Taxes
You must withhold the employee's portion of the social security and Medicare unless the employer chooses to pay both the employee's share and the employers share. The taxes are 15.3% of cash wages. Your share is 7.65% and the employee's share is 7.65%.
You may also be responsible for paying federal unemployment taxes.

As for the home office:

Claiming a Deduction for Your Home Office

IRS Tax Tip 2009-53
Taxpayers who use a portion of their home for business purposes may be able to take a home office deduction if they meet certain requirements.

In order to claim a business deduction, you must use part of your home for one of the following two reasons:

Exclusively and regularly as either: your principal place of business, or as a place to meet or deal with patients, clients or customers in the normal course of your business. Where there is a separate structure not attached to your home, the regular and exclusive use does not need to be your principal place of business as long as the use is in connection with your trade or business.

On a regular basis for certain storage use -- such as storing inventory or product samples -- as rental property, or as a home daycare facility.
Generally, the amount you can deduct depends on the percentage of your home that you used for business. Your deduction for certain expenses will be limited if your gross income from your business is less than your total business expenses.

If you use a separate structure not attached to your home for an exclusive and regular part of your business, you can deduct expenses related to it.

There are special rules for qualified daycare providers and for persons storing business inventory or product samples.

If you are self-employed, use Form 8829 to figure your home office deduction and report those deductions on line 30 of Schedule C, Form 1040.

Different rules apply to claiming the home office deduction if you are an employee. For example, the regular and exclusive business use must be for the convenience of your employer.

For more information see IRS Publication 587, Business Use of Your Home, available at IRS.gov or by calling 800-TAX-FORM (800-829-3676).

[coldwine]

Originally Posted by lenniel

A couple of quick questions:

1) we pay a nanny cash every week and do not take out any taxes nor do we provide any benefits other than time off with pay. I don't know if she pays taxes on these earnings or not. I don't believe she has a social security card. Can I deduct any of this?

What do you think? Do you really believe the feds are going to let you take a deduction for maid service?

You have to be concerned with your withholdings. If you're giving her money, you're not taking out the proper amount of federal and state withholdings, so there's no guaranty that she's going to pay tax on it... Which she probably won't. That's definitely not acceptable.

2) I work in sales but have a home office. What can I deduct from the home office?

Nope. Not unless you can prove you used the office only for business purposes.

In other words, probably not.

3) What are some other common deductions that people miss?

Very few. There aren't many deductions available for most people to begin with other than the standard.

I got hit by the AMT last year to the tune of 4 digits and I did not enjoy that. Want to avoid it this year.
Thanks in advance.

I can sympathize.

Seek a tax professional in the real world, not online.