This has probably been addressed a million times but I am new here. My husband and I have a small business that we run out of our home. He has exclusivley done the work himself for 4 years but now he needs a little help sometimes. We have been using some teenagers from our church and paying them cash. Sometimes we use the same kids over and over and some are making quite a bit of money when we are busy. This money is starting to add up and I am wondering if there is a legal way to deduct it on our tax return. I REALLY, REALLY don't want to deal with payroll but don't want to break the law either. This is usually only going to happen in the summer but I am afraid some of these kids will make more than $600, which I believe is the amount where you have to start reporting and withholding. I just want to know what others do??? Thanks

 

Cinnamon, Welcome to the DIY Forums.
I am NOT an expert in this field but I did run a Private Club and you can't have the best of both worlds. Your concern should be if one of your "employees" gets hurt. If you do not have them listed as a Private Contractor who pays their own taxes, and insurance you have a problem. The labor laws have changed quite a bit and I BELIEVE you have to have Workmans Comp on even ONE employee. Since the Government is receiving no money from the kids employment, you cannot claim it. You would need a 1099 form that states they are earning and paying taxes on money earned. There USED to be a "casual labor" clause where you could hire someone to do labor with a cap on earnings and not claim it, but I believe that has all changed. One of the experts here will probably jump in and answer your question better than I can. Good luck.

 

Thanks for your speedy reply majakdragon. That is what I was afraid of. Nevertheless, I appreciate your reply. I am going to have to re-think this whole thing. I would almost rather turn away business and just forget the helpers. It is so much more simple when it is just my husband and I. But the extra money is great........sigh......... I would welcome any other opinions but this is probably a cut and dry legal issue, so opinions don't do alot of good. I'm all ears though if anyone else wants to chime in. Thanks again!

 

There is a post, I belive in this specific forum, which deals with the difference between employees and independent contractors. It would be good for you to read this. I will try to find it again and post back with the link.

 

Here's the link:

http://forum.doityourself.com/showthread.php?t=61911

I am refering to the portion of the thread by twelvepole.

 

Thank you very much J.M.C. for taking the time to find that link. Boy, there was alot of info there. They are talking about Indiana law but I would imagine it is not much different here in Arizona. Like I said previously, I guess we will have to re-think this whole thing. We have abided strictly by the rules with all other tax and license issues so I don't want to mess things up now. I appreciate your's and everyone else on this forum's willingness to help total strangers. Thanks again and take care!

 

The Indiana regs in the thread are similar to those in my state

You have employees or you hire independent contractors

As an indendent contractor that has some regular commercial accounts, I'm very aware of the differences

Without clear distinctions and definitions, in the case of damage or accident the insurance companies will define them for you
So they had best be clear
No "casual labor" anymore

On the other side, it's it bit of paper work for me to pay a day laborer if I need a little help, and it's not always worth the hassle
If they are like me, and set up as such, it's much easier
So I tend to hire temp help that are also independent contractors and carry their own insurance etc.

It may be possible to pay your teens as independent contractors and they must withhold their own taxes and such (and it was more common 20 or 30 years ago), but the issue becomes cloudy in the event of an IRS audit, any claims to the Dept of Labor, any accidents, or insurance co involvment