If you did not already file timely employment taxes it will do you both better for her to be self employed, unless she meets any of the qualifications below. Per the IRSYou can count work-related payments you make to relatives who aren't your dependents for the Dependent Care Credit, even if they live in your home. However, don't count any amounts you pay to: A person for whom you (or your spouse if filing jointly) can claim as a dependent; Your child (including stepchild or foster child) who was under age 19 at the end of the year, even if he or she isn't your dependent; A person who was your spouse any time during the year; or The parent of your qualifying person if your qualifying person is your child and under age 13.

Question

Paid my sister who lives in my home, to care for my child in our home. Is she self employed or a household employee?

Forum|Forum|4 years ago
April 14, 2022
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AliciaP1

If you did not already file timely employment taxes it will do you both better for her to be self employed, unless she meets any of the qualifications below.

Per the IRS

You can count work-related payments you make to relatives who aren't your dependents for the Dependent Care Credit, even if they live in your home. However, don't count any amounts you pay to:

A person for whom you (or your spouse if filing jointly) can claim as a dependent;
Your child (including stepchild or foster child) who was under age 19 at the end of the year, even if he or she isn't your dependent;
A person who was your spouse any time during the year; or
The parent of your qualifying person if your qualifying person is your child and under age 13.

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M

mb23taxes

I'm completing Form 7203 and it's telling me I have an error because I can't have a gain in section 1 and a loss in section 3, but the section 3 amount is actually a deduction and not a loss. What do I do?

M

mb23taxes

As long as you have confirmation that the deductions are not already included in ordinary income (usually they are) and that the deductions are not actually distributions, then yes. Not every line on a K-1 belongs on your basis reconciliation (7203).

Before you make any adjustments to the income be sure to go through the guidance to complete your 7203 at S Corporation Stock and Debt Basis.

@mb23taxes

Okay, but it's still telling me I cannot have a gain in Part 1 Line 3a and a loss in Part 3, even though there are NO amounts in Part 3. Arrrggg!!!!