I live in Idaho and I am a nanny. I watch children in private homes. I used to have a licensed home based child care, and taxes were involved, but as long as I kept accurate records, it wasn’t so bad. When I closed down my child care and went to being a nanny, I wasn’t sure of the laws. I checked with the local city clerk’s office and was told I didn’t need any license or training to be a nanny. It’s considered babysitting and anybody can do that. I checked with an organization called Idaho Stars who is the ultimate in child care information for Idaho, and they could not find one law or rule concerning a nanny. I also asked the opinion of the person who used to do my taxes on how to handle taxes, and was told since I am self-employed, I still file a Schedule C for my income. For the last two years this is how I’ve done it.
At the beginning of April of this year, I got an audit notice. They were questioning my income. They wanted a copy of my license and a copy of my accounting books with proof of my income. My official accounting consists of a notebook where I log all payments, and a computer copy of the same thing. So, I sent a detailed letter explaining the whole situation to the IRS with a print out of my income. By my calculations, I should have owed $540.00 in self-employment tax after deductions.
I finally heard back from the IRS, nearly five months later. It was determined that since I have no business license, I am not a business. I don’t have ample proof that I made this money, so therefore I didn’t make anything and owe no taxes.
Here is what I have a problem with. Okay, true I only made $8,200 last year (and supported three people on this income), but I still should have to pay taxes on it! Why should I not pay when someone else working part-time and not self-employed would pay taxes? I don’t understand how the system works. I am also at a complete loss as how to handle this year’s taxes. I have no clue how to file if I’m not supposed to use Schedule C. I will probably have to pay through the nose to have an accountant do them for me.
I’m just still in shock and wanted to share. What a world, what a world!