December 19, 2019 at 6:57 pm #5004toddParticipant
Each month my brother receives a $2000 check from my elderly walker-bound mother. This check is for:
Rent assistance: $200
The caregiving requires that he stay at our mom’s house 4 days/week. It includes ordering & dispensing meds, assisting mom to get in and out of bed, grooming, light cooking, transporting mom to appointments, encouraging and leading physical therapy exercises and fall prevention/quick recovery.
My brother also does some gardening/handyman work for a few other people, from which he averages $150/month. He has no other income.
Question 1: Which 1040 line should my brother put his monthly earned income of $1950 ($1500 + $300 + $150)?
Question 2: Can my mom deduct her $1500/month caregiving expenses on her return?
Question 3: Is there anything else we should know?December 25, 2019 at 10:55 pm #5033FloridaParticipant
This is my take on question 1:
He will pay both self-employment tax (15.3%) and income tax (10%) on the $1950 per month, $23,400 per year.
Self-employment tax (medicare + social security) is 15.3% or (.153 x $23,400) = $3580.
His income tax is calculated after deducting his standard deduction and deducting 50% of the amount of his self-employment tax. Income of $23,400 – $1,790 (1/2 SE tax) – $12,200 (standard deduction) = $9,410. His tax rate is 10% so he will owe $941 in income tax.
Total tax will be $3588 + $941 = $4,529
He will use Schedule C-EZ and Schedule SE to document his income and calculate his self-employment tax.
His self-employment income from Schedule C-EZ will flow back to line 3 on Schedule 1 and then to line 7a on Form 1040. The deductible part of his SE tax (50% of the total SE tax) will flow from Schedule SE to line 14 in the Adjustments to Income area of Schedule 1 and then to line 8a on his Form 1040.
The amount of his self-employment tax from Schedule C-EZ will flow to Schedule 2 line 4 to line 15 on Form 1040. He will put his income tax amount on line 12a of Form 1040.
Looks like he will need to fill out:
Hopefully, someone will point out any errors or you can double-check by looking at the forms. I always use tax software so never really look at forms but they are available on the IRS website with a quick search.
The good news is he is building social security credits.The bad news is he has a tax bill due in April 2020 if he hasn’t been making estimated payments during the year…which he probably needs to do in 2020.December 27, 2019 at 2:34 am #5038toddParticipant
Thank you so much Florida. Very helpful!
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