Brinker: "We are back in Omaha. Hello Hugh."
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Hugh: "Hi Bob. First time caller - been listening to you for a long time. I'm a CPA here in Omaha. With regard to your babysitter, the code......(Brinker interrupts: "Not my babysitter, the caller was a babysitter.").....well, Code Section 102, which excludes gifts from income, does not exclude gifts in the employment arena unless you can show that the payments were made for other than the employment situation."
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Brinker: "Yeah, but Hugh, go back to the caller, the caller is working for somebody that is not treating her as an employee in any way, shape or form."
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Hugh: "If it's for services, for services rendered, it doesn't matter whether the other person reports it or what they do with it. If it's for services rendered, the funds coming to you, then it is income for income tax purposes."
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Brinker: "Well, wait a minute, Hugh, I don't disagree with anything you are saying, but if it's for services rendered then the employer, who is paying her $10,400 dollars a year should be treating it as a salaried position with takeout for the City of New York, State of New York, Social Security, Medicare and the Federal Government, if applicable."
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Hugh: "Probably should be."
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Brinker: "Well, that's the way it should be done - that's not being done."
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Hugh: "I agree, but it still constitutes, whether the employer is doing their end properly, it still constitutes income to her."
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Brinker: "Not if it is a gift! There is no employment relationship. There's nothing in any way, shape or form, in a situation - she's not working for some company, there's no corporate return being...uhhh...affected by this. There's nothing being done. (Hugh is talking in background, Brinker talks over him.). In other words, what you're saying is true if that applies, but in this case there is no history whatsoever that that's what happening."
Hugh: "There's no paper trail, but even if there's no paper trail, it still constitutes income to her because the remuneration was for services."
Brinker: "Well that's what YOU say, but if the woman who's hiring the babysitter, ummm...does not say that. If the woman who's hiring the babysitter says, I'm gifting her this money - and she doesn't even have to give a reason, you know that, she can gift anybody she wants - so I'm gifting her this money, and that's the end of it. Then the fact that she's babysitting becomes irrelevant! She can do whatever she wants with her time. If she wants to spend time with the child, that's up to her."
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Hugh: "Well, if the whole facts were known, it would constitute income to her and...."
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Brinker: "That's what I said in the first place. That it seems to me that the person who's hiring the person has a responsibility to follow the letter of the law, which is what you're talking about - and I agree with that - and file all the necessary paper work. Obviously, this woman does not want to file papers with the City of New York, State of New York, Federal Government, Medicare, Social Security, so she's just handing her the money. Once she just hands her the money, with no connection to the babysitting, it becomes a gift."
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Hugh: Well no. It doesn't BECOME a gift - nobody just knows that it was remuneration for services. And I would agree with you that I wouldn't WANT to file all those papers either."
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Brinker (raising his voice as though a very exasperated): "Well, I agree with you 100%, and I agree with everything you're saying 100%. But what I'm saying is as long as the person hiring the babysitter is not going to file all those forms, then it places the person receiving the money in a pretty ridiculous position because what she would have to do - let's stay with your thought of the letter of the law. What she technically should be doing here, Hugh, is turning in her employer for violating the law. (Hugh: "Absolutely.") Yeah, she's not going - I mean, I mean, you can tell her to do that, but she's not going to do that - she wants the $10,400 dollars. And this is probably somebody who wants a friend." (Hugh unsuccessfully tries to talk in background.) So I mean practically speaking, you know - we can talk about the letter of the law - and I'm in agreement with you 100% and I think the woman should be filing all those documents and I think the woman should be filing it as income. But we both know that the chances of that happening are about as good the Tampa Bay Devil Rays playing in the World Series. It's not going to happen!!!
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Hugh: "One of the risks that the employer runs is what if the person becomes injured while in their employ and then they file suit under Workmen's Comp? I mean that...."
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Brinker: "And that's very possible while you are babysitting because it's very, very easy, when you babysitting, as we both know to get injured. I mean at least a black eye."
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