| Requirements to issue a W-2 or 1099-MISC |
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domingo3
New Member
Cash: $ 1.95
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Joined: 03 Jan 2006
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| Requirements to issue a W-2 or 1099-MISC |
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Here's a hypothetical situation that I'm trying to figure out the answer to.
Let's say my friend wants to start up a baby modeling business and is willing to pay my child $4000 for his services.
What kind of start up expenses would he incur in the business?
What would he be required to do in order to issue the appropriate tax document? (Not sure if it's a W-2 or 1099-MISC)
Can he get a deduction for losses if he doesn't make any profit?
How complicated would this whole process be - maybe an estimate in terms of man-hours. None of us have any experience in running our own businesses at all. I've tried searching the web, but I'm not doing a very efficient job because I don't think I know exactly what terms to search for.
Thanks much.
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Sun Feb 05, 2006 2:17 pm |
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efflandt
Senior Member
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Location: Elgin, IL USA
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Start here http://www.irs.gov/businesses/small/index.html
For a one shot or intermittant deal, you would be like an independent contractor. The business would want to account for that expense so they are not get taxed for it, so they would require a W-9 from you to determine if tax should withheld and what should be filed for whatever 1099.
A W-2 would be for a regular employee with federal and state tax withholding, FICA deductions, etc. If that was the case, you would fill out a W-4 to adjust exemptions or withholding per its instructions.
I don't know about state requirements. But if someone would owe too much tax at filing time, quarterly estimated tax payments might be required for fed and/or state to avoid underwithholding penalty.
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Sun Feb 05, 2006 3:39 pm |
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domingo3
New Member
Cash: $ 1.95
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Joined: 03 Jan 2006
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| The real question |
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Perhaps I am beating around the bush, and should just come out with my situation.
I would like to be able to open a Roth IRA for my child. In order to contribute to an IRA, you have to have earned income.
I was thinking the baby modeling bit would allow my baby to have income. I would just slip back to my friend whatever it would cost him to set up the "business" plus the cost of the paycheck.
Who's to say that my friend couldn't be starting up a business like this? He just has to have intent to make a profit, right?
Is there an easier solution to my situation?
Thanks
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Wed Feb 08, 2006 2:34 am |
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coaster
Senior Advisor
Cash: $ 1318.80
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Location: Wisconsin
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| Re: The real question |
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quote:
Originally posted by domingo3
He just has to have intent to make a profit, right?
No, I don't think so. I seem to recall that under the IRS guidelines for "hobby" businesses you have to make a profit once every so many years, otherwise they disallow the expenses.
~Tim~
Eye Candy : Why Whimsy
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Wed Feb 08, 2006 2:51 am |
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JBendar
Senior Member
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Joined: 22 Mar 2004
Location: Woodbridge, New Jersey
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| Roth IRA |
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Guidelines for Roth IRA Contributions
IRS Tax Tip 2006-25
Taxpayers confused about whether they can contribute to a Roth IRA should consider guidelines based on the following categories:
• Income Limits To contribute to a Roth IRA, you must have compensation (e.g., wages, salary, tips, professional fees, bonuses). These limits vary depending on your filing and marital statuses.
• Age There is no age limitation for Roth IRA contributions.
• Contribution Limits In general, if your only IRA is a Roth IRA, the maximum 2005 contribution limit is the lesser of your taxable compensation or $4,000 ($4,500 if 50 or older). The maximum contribution limit phases out depending on your modified adjusted gross income.
• Spousal Roth IRA You can make contributions to a Roth IRA for your spouse provided you meet the income requirements.
• Time Contributions to a Roth IRA can be made at any time during the year or by the due date of your return for that year (not including extensions).
Roth IRA contributions are not tax deductible and are not reported on your tax return. On the other hand, you do not include in your gross income, and therefore are not taxed on, any qualified distributions or distributions that are a return of your regular Roth IRA contributions or that are rolled over into another Roth IRA.
For complete information and definitions of terms, get Publication 590,
Individual Retirement Arrangements. Visit the IRS Web site at IRS.gov, or call 1-800-TAX-FORM (1-800-829-3676) to request a free copy of the publication.
One more thing in reference to Tim's comment. In order for the IRS not to disqualify expenses as a "hobby", the individual has to make a profit 3 out of 5 years.
JBendar 
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Sun Mar 12, 2006 6:57 pm |
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