<p>"The kid would have to file a Schedule C and declare it as taxable income. "</p>
<p>C-EZ with almost no business expenses. Otherwise the whole purpose of showing an income is defeated.</p>
<p>GP, I am in Ca. I have a great network.</p>
<p>dstark, until Anthem has a working provider search tool, you can’t know for sure who is in your network. I think Anthem has already said that the 2014 network for individual plans has 40,000 fewer doctors in Ca.</p>
<p>Texas, I agree about the C-EZ.</p>
<p>I know my local hospital is on the list. The list that is already out is great. Everything added is just a cherry on top.</p>
<p>For parents who are using mutual funds or similar, they can pay for management of their assets instead of a fund manager–paying their young adults the 1% or higher of assets that they are currently giving the fund manager. The young adult can invest the funds in index funds with low fees and/or value stocks and that can be part of the $12,000 so the kid has an income and qualifies for subsidies. </p>
<p>The young adult will have to read up on investing and keep abreast of the news. “The Little Book the Still Beats the Market” is a good read to help them in this new money management career. It’s a compelling and easy read with good basic concepts which I FINALLY read.</p>
<p>Himom, you kind of need to be licensed… </p>
<p>We are also talking $120 a year in income. (1 percent times $12,000)</p>
<p>So you’re telling the IRS that your kid is managing your assets. If I was a tax auditor I would be all over this like a dog with a bone.</p>
<p>As to the parents hiring the kid:</p>
<p>If the parents pay wages and take out appropriate payroll deductions, the kid is not “self-employed” and does not have to file a schedule C. The kid is an employee of the parents. He is a wage earner. </p>
<p>The parents do not need to have a business to hire an employee to work for them. </p>
<p>The parents need to get an employer ID number and pay appropriate payroll taxes, and then prepare and give the kid a W2. Poetgrl is right - it’s no different than hiring a housekeeper or nanny.</p>
<p>It may also be good for the kid: if there is some real work that he can do that benefits his family, then that’s better for his self-esteem and his parents feel better about the situation, as they probably are financially supporting their adult son in any case; and even though they know he has a disability, it probably is frustrating for them to see him idle. Also, it give the kid a work history that might help in finding employment later on. Yes, it’s working for his parents which isn’t all that impressive to employers – but it is still something as opposed to nothing to put on a resume.</p>
<p>So all in all I would think it is a good idea. </p>
<p>It also gives the kid the benefit of money being paid toward social security and medicare, because some day that young Aspie adult is going to be an old Aspie adult, and his own eligibility for benefits like Medicare may depend on the number of quarters he has worked in his life. </p>
<p>The IRS will NOT audit the family because everything is being done correctly: IRS doesn’t care whether employers/employees are blood relatives. They just care that payroll taxes are paid on time, and that income taxes are withheld if appropriate. A family that pays an adult child will over $14,000 as a salary for a specific service is not “evading” the gift tax, because they are paying a wage which is reported as taxable INCOME by the child (as opposed to an untaxed gift). </p>
<p>I think that the only question is whether there is legitimate work that the child can do. I really don’t think IRS would care if the the kid wasn’t actually doing anything – why would they? When the parents hire the kid, they are turning untaxed assets into taxable earned income for another person – good in the view of the IRS. </p>
<p>To your friends, the kid is their offspring – to the IRS, the kid is simply “any single taxpayer.” That is, it doesn’t make any difference to the government whether the parents hire their offspring or a stranger – it’s a person and a paycheck.</p>
<p>Well, if the kid is going to receive substantial subsidies from the govt because the parents are paying the kid for a phony reason, I would think the IRS might take a look at this.</p>
<p>Thinking about it, although the parents are going through the exercise of paying the kid, paying taxes etc, much of it might make it back in EIC since the kid sounds older than 25?</p>
<p>Goldenpooch, the IRS doesn’t give a rats ass what or why an employer is paying an employee to do. All IRS cares about is that payroll taxes are paid on time, and that the wages are reported annually on a W2.</p>
<p>The only way the child would be required to file a schedule C would be if the parents paid him straight cash and then submitted a 1099, which would raise all sorts of questions, because IRS is not too keen on employers who evade their responsibilities by improperly classifying wage earners as independent contractors.</p>
<p>You would be correct if the kid wasn’t receiving substantial subsidies from the govt due to this phony payment of income to the kid. Remember, the IRS is responsible for dispensing the subsidies. Hopefully, they are going to crack down on all these games to defraud the govt.</p>
<p>GP, the “reason” that the parents would hire the kid is to provide the kid who is otherwise unemployable with an earned income. </p>
<p>I don’t see how that is “phony”. </p>
<p>I think that’s good parenting: certainly a better choice than parents providing financial support to an over-26-year-old while he sits in front of the t.v. and plays videogames all day. </p>
<p>I have a relative who is a flake and used to call me up all the time trying to “borrow” money. I would tell him that I couldn’t lend him money but that I had a lot of odd jobs that needed to be done around my house, like cleaning out the garage, and offered to pay him $20/hour to do the work for me. He never took me up on that, but did stop the calls. But if he had shown up, the work wouldn’t have been “phoney”.</p>
<p>As long as you aren’t paying the kid to do something illegal, it’s legal to be a paid companion in this country, even a paid escort, for crying out loud.</p>
<p>I would advocate giving the kid some set of duties, some actual responsibility, maybe as a personal chef, or a driver or a gardner or a personal assistant.</p>
<p>But, honestly, the job of butler or housekeeper is a career job, actually. A personal assistant can pay very well. You’d be surprised.</p>
<p>I can think of ten things I could pay someone to do, legitimate things, domestically.</p>
<p>caretaker, housekeeper, gardner, driver, chef, personal assistant, errand runner, personal shopper, stylist, companion. All of these are actually jobs you can hire someone to do.</p>
<p>ETA: GP, I have no idea how this is defrauding the government. The kid is either going to get medical coverage or get medical coverage, in this country, now. I don’t know what you are talking about.</p>
<p>No one is being defrauded: the ACA was set up with the expectation that the chronically unemployed would be eligible for Medicaid, which is a system whereby the government absorbs 100% of medical costs. It is no different to the government if the young person gets a job working for his parents as opposed to a job working for McDonald’s. Either way there are wages being paid and the young person qualifies for certain benefits.</p>
<p>The kid (same as me) needs enough income to qualify for the subsidy. This in itself is a perverse, weird situation. I have the same issue. Is it “phony” income if I do a Roth IRA conversion for the purpose of having enough MAGI so I can qualify for a subsidy? I have loaned my son money, so part of my income will be interest income paid to me by my son. Is that “phony” income? (This loan was made in 2013 but ACA subsidies was not a consideration at the time we made the loan). There is so much game playing in the business world for the sole purpose of minimizing taxes, I object to people objecting to a reasonable strategy designed to overcome a ridiculous unintended consequence of the ACA, ie people not having enough income to qualify for healthcare subsidies. I am still shaking my head over that one.</p>
<p>My son got his new revised rate increase for his non ACA 2013 plan that will now be renewable for 2014. He was paying $110 and his rate for 2014 will be $129. I am really surprised at the small (17%) increase. We will look at ACA plans, but since he will not likely be eligible for subsidies there is a good chance he will just keep his existing plan.</p>
<p>I am not sure why this is so difficult to understand. Why are the parents paying the kid. Because they want to get huge subsidies from the govt. It is not because the kid is their servant, butler, gardener or whatever. It is a fraudulent transaction to milk the taxpayer. If the IRS allows this, then that would be a crime in of itself. </p>
<p>If the kid resides in a state without the Medicaid expansion, then the kid would have had to pay for his insurance if his income wasn’t artificially boosted with this phony maneuver. So by allowing the parents and the kid to play this phony game, the taxpayer has incurred a substantial loss. Hopefully the IRS and/or the state will crack down of these types of games</p>
<p>I don’t see it that way. IRS goes after people who under report their income and/or not pay taxes. </p>
<p>If someone wants to pay taxes on an income they did not earn or even income from illegal means, they have never had a problem. If you think about it, Medicaid costs the government more than a subsidy. This person simply has to move to another state to be eligible for Medicaid and then IRS would collect zero taxes.</p>
<p>I am sure the greater fraud will be people understating their income to get more subsidies. I am sure this type of fraud will probably run in the billions.</p>