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Day care income tax. How should we split and report our profit for income tax purposes.?

  • My friend and I run home based day care. She is my business partner. We really don't have any agreement other than verbal understanding. I have been paying her part of the income using check so far. (all of 2011). Day care license is under my name. How should we do our taxes? How should I report her earnings in my tax return. Do I have to file form 1099? For example: we made $10000 - $2000 expense=$8000 profit. I paid her $4000 and my profit is also $4000. For income tax purposes how do I deduct her portion of $4000 from my income tax. I get all the payments from our customer ($10000) since day care is under my name and I give her a check to her part of our profit ($4000). Thanks.

  • Answer:

    unless you have registered as a partnership with and EIN number and will file a partnership return, form 1065, you will report your entire income on your Sch C, if you pay your helper half of it, you issue her a 1099 that she will report on her Sch C, you will both have self employment tax on sch SE

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You have formed a partnership, whether it's in writing or not. Absent a written agreement to the contrary, it's presumed to be an equal division of the profits. Partnerships file Form 1065 to report the profits and distribution of the profits to the partners. Each partner gets a Schedule K-1 to report their share of the profits. The partners use the Schedule K-1 to report their shares on their individual Form 1040 returns. The distributions of profits go on Schedule E and you attach Schedule SE to calculate your self-employment tax. Given that this is all probably Greek to you, hire a tax professional.

Bostonian In MO

You need to have your business agreement in writing. You have formed a partnership. You need to talk to a tax pro.

Cathi K

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