Author: Honeyoneohone (Original Post
(with editorial comments " EC" by Kirk Lindstrom)
»
honeyoneohone
- Becky, the Babysitter Calls Bob Brinker's Moneytalk
Here
is a transcript of the call from Becky, the babysitter, on Saturday,
April 7, 2007. Bob Brinker recommended that Becky consider $10,400
yearly babysitting wages as a gift and not pay taxes on it:
EC : Warning! I believe Bob is mistakenly advising Becky to commit tax fraud in this call. Read Part 2 for what Bob said to a CPA caller about his advice to Becky and read Part 3 for what Bob said the next day
about these calls.
Bob Brinker: "Becky, in the Bronx, listening to WABC radio - hello Becky."
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Becky: "Hi Bob, thank you so much for taking the call and for all your help."
.
Brinker: "What's up?"
.
Becky: "Question for you. My only income at this point is from interest
and dividends. However, I work at a babysitter and I know I have to
report the income. It's paid off the books and I know that I have to
report it as taxable. Am I allowed to get an IRA with this income -
it's very confusing to me."
.
Brinker: "Well Becky, any earned
income, including babysitting income, would be income that you could
designate for in investment in an IRA. Obviously, this would be income
that would be on your income tax report. You would be declaring this
income. Any income that is received for services rendered - certainly
that would include babysitting - it includes golf so I think it should
include babysitting. So there you go. You've got the opportunity there
to put whatever you want in an IRA up to the $4000 limit for people
under the age of 50."
.
Becky: "Okay, cause when I asked the accountant - maybe he didn't understand - he said I had a W-2 for that."
.
Brinker: "Well I'd rather you go through that kind of detail with your
CPA. But my understanding is that if you have earned income that is
declared income, on your tax return that that would qualify. Now how
much are you making as a babysitter?"
.
Becky: "I make about $200 a week."
.
Brinker: "So you are talking about roughly $2400 dollars a year?"
.
Becky
: "That's it, yeah."
EC: Math Error $200 a week x 52 weeks a year is $10,400, serious money. Bob corrects this later in the call. Also: Social
Security and Medicare taxes will need to be paid even if the woman has
enough deductions and exemptions to be in a zero income tax
bracket. Look-up "Nannygate Revisited" for more information.
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Brinker: "Well, are there rules that apply to the payment of that $200
a week in terms of you being an employee of the individual?"
.
Becky: "I just work for a woman and I take care of her children, so everything is private."
.
Brinker: "So she hands you $200 dollars?"
.
Becky: "Exactly."
.
Brinker: Well, your accountant is right when he says in order for you
to have income going into an IRA, it has to be declarable income - all
right? If somebody is paying you $200 dollars a week, er a month - a
month?'
.
Becky: "No, a week."
.
Brinker: Oh, that's
$10,400 a year. All right - if someone is paying you $200 dollars a
week to baby-sit their children and they're not taking any taxes out,
well that's the same as a gift, isn't it?"
.
Becky: "Well I still have to report it on my tax."
.
Brinker: "Why? Why would you have to report it on your taxes? Your
employer is allowed to gift you up to $12 thousand dollars a year with
no tax whatsoever. Why would you have to put it on your income tax
return?"
.
Becky: "I didn't know that. Thank you."
.
Brinker: "Well, anybody - let's get the rules straight, okay - has
nothing to do with family - nothing. Under current law, under current
gift tax law, anybody can give anybody else - every single calendar
year - up to $12 thousand dollars in the form of a gift. Okay? (Becky:
"Yes.") That means that this employer that you have - this woman whose
children you're watching has the right under current gift tax law to
give you - with NO taxes - up to $12 thousand dollars a year. And you
don't even have to watch her children. She could just hand it to you as
a gift because she likes you. (Becky: "Okay.") All right. So your
relationship with her is covered by the gift tax law. You see what I'm
saying?
.
Becky: "Yes, I do."
.
Brinker: "In other
words your saying, well yeah, I watch her children, but she gives me
$200 a week in the form of a gift. Ergo, NO TAXES, but you cannot put
that money in your IRA. That is not earned income."
.
Becky: "Okay, and what were you trying to tell me about the golfing before. I didn't follow you - something about golf."
.
Brinker: "No, I said that you certainly - I said that why shouldn't you
get paid for babysitting - people get paid to play golf. People get
paid to hit baseballs in the Bronx. Why shouldn't you get paid for
babysitting? I have no problem with that. But the point is, if it's not
declarable income - it sounds like nobody is declaring it. It sounds
like she's not doing a W-2. It sounds like she's not withholding New
York State or City taxes. It sounds like she's not withholding Social
Security and Medicare. It sound like none of this is going on. It
sounds like she's just handing you $200 dollars."
.
Becky: "That's correct."
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Brinker: "Well then my advise to you is, consider that a gift. Forget
about the IRA, because if you start trying to monkey around with an
IRA, well first of all, it's not declarable income, you are going to
get your - your going to get the woman in trouble - especially that
amount. Consider it a gift because the reality is there would be no
tax. But you cannot put that money in an IRA."
EC : Warning! I believe Bob is mistakenly advising Becky to commit tax fraud in this call. Read Part 2 for what Bob said to a CPA caller about his advice to Becky and read Part 3 for what Bob said the next day
about these calls.
Becky: "Okay."
.
Brinker: "Thank you Becky. This is Moneytalk__Bob Brinker
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