How to account for personal baby sitter?
"Are you working for a company that offers a Dependent Care Account? You may be able to withhold up to $5000/yr pre tax for care for you child.  If you cover more than half her expenses, she is your dependent. You can't ""double dip."" If she is your dependent, she cannot be the care provider for purposes of the DCAS, see Pub 503  top of p7 ""Payments to Relatives or Dependents."" How do you think a business would change your situation? The DCA is a small tax break, if you have no business now, this break isn't something that should drive this." You should check several things: How your business can deduct your child care expenses is beyond me. If your mother-in-law starts a business as a neighborhood babysitter, she might get some deductions for her related expenses though. You said your mother-in-law lives with you. Does she pay rent, or are you splitting the cost of housing? That would also have to figured into the equation.  If you had a business you would now have to declare the expense on your business taxes. This would also then be income for her, which she would have to account for on her taxes. Remember there are both state and federal taxes involved. Regarding expenses like diapers. If the MIL had the business she could deduct them as a business expense. If you have the business it would greatly complicate the taxes. Your business would be essentially covering your personal expenses. If your MIL was not a business the cost of diapers would be paid by you regardless of the working situation of you and your spouse. To claim the tax credit: You must report the name, address, and taxpayer identification number   (either the social security number, or the employer identification   number) of the care provider on your return. If the care provider is a   tax-exempt organization, you need only report the name and address on   your return. You can use Form W-10 (PDF), Dependent Care Provider's   Identification and Certification, to request this information from the   care provider. If you do not provide information regarding the care   provider, you may still be eligible for the credit if you can show   that you exercised due diligence in attempting to provide the required   information. The IRS will be looking for an income tax form from your MIL that claims the income.  Getting too cute with the babysitting situation, by starting a business just for the purpose of saving money on taxes could invite an audit. Also it is not as if you just claim 3000 and you are good to go. You can only claim a percentage of the expenses based on the household AGI, the more the make the more you have to have in expenses to get the full 3000 credit, which mil cause more taxes for your MIL. Plus the whole issue with having to pay social security and other taxes on a household employee. It might be best to skip the risk of the audit. Claiming your MIL as a dependent might just be easier.
Wikipedia has a nice definition of financial literacy (emphasis below is mine): [...] refers to an   individual's ability to make informed   judgments and effective decisions   about the use and management of their   money. Raising interest in personal   finance is now a focus of state-run   programs in countries including   Australia, Japan, the United States   and the UK. [...]  As for how you can become financially literate, here are some suggestions: Learn about how basic financial products works: bank accounts, mortgages, credit cards, investment accounts, insurance (home, car, life, disability, medical.) Free printed & online materials should be available from your existing financial service providers to help you with your existing products.  In particular, learn about the fees, interest, or other charges you may incur with these products.  Becoming fee-aware is a step towards financial literacy, since financially literate people compare costs.  Seek out additional information on each type of product from unbiased sources (i.e. sources not trying to sell you something.) Get out of debt and stay out of debt. This may take a while. Focus on your highest-interest loans first. Learn the difference between good debt and bad debt.   Learn about compound interest.  Once you understand compound interest, you'll understand why being in debt is bad for your financial well-being. If you aren't already saving money for retirement, start now.  Investigate whether your employer offers an advantageous matched 401(k) plan (or group RRSP/DC plan for Canadians) or a pension plan.  If your employer offers a good plan, sign up.  If you get to choose your own investments, keep it simple and favor low-cost balanced index funds until you understand the different types of investments.  Read the material provided by the plan sponsor, try online tools provided, and seek out additional information from unbiased sources. If your employer doesn't offer an advantageous retirement plan, open an individual retirement account or IRA (or personal RRSP for Canadians.)  If your employer does offer a plan, you can set one of these up to save even more.  You could start with access to a family of low-cost mutual funds (examples: Vanguard for Americans, or TD eFunds for Canadians) or earn advanced credit by learning about discount brokers and self-directed accounts. Understand how income taxes and other taxes work.  If you have an accountant prepare your taxes, ask questions.  If you prepare your taxes yourself, understand what you're doing and don't file blind.  Seek help if necessary.  There are many good books on how income tax works.  Software packages that help you self-file often have online help worth reading – read it. Learn about life insurance, medical insurance, disability insurance, wills, living wills & powers of attorney, and estate planning.  Death and illness can derail your family's finances.  Learn how these things can help. Seek out and read key books on personal finance topics.  e.g. Your Money Or Your Life, Why Smart People Make Big Money Mistakes, The Four Pillars of Investing, The Random Walk Guide to Investing, and many more. Seek out and read good personal finance blogs.  There's a wealth of information available for free on the Internet, but do check facts and assumptions. Here are some suggested blogs for American readers and some suggested blogs for Canadian readers. Subscribe to a personal finance periodical and read it.  Good ones to start with are Kiplinger's Personal Finance Magazine in the U.S. and MoneySense Magazine in Canada.  The business section in your local newspaper may sometimes have personal finance articles worth reading, too. Shameless plug: Ask more questions on this site. The Personal Finance & Money Stack Exchange is here to help you learn about money & finance, so you can make better financial decisions.  We're all here to learn and help others learn about money. Keep learning! "**Reposted so you don't have to look at silly GIFs for 50% of the article.**   Sophie is a physical penetration tester and information security consultant. She specializes in social engineering security assessments including physical, voice (vishing) and text (phishing). She consults in remediation and prevention of security incidents through creation of policy and procedures, as well as customized training for your individual office culture. Prior to working in infosec, Sophie was a journalist, photographer, and a mom.  Hello! My name is Sophie and I break into buildings. I get paid to think like a criminal.  Organizations hire me to evaluate their security, which I do by seeing if I can bypass it. During tests I get to do some lockpicking, climb over walls or hop barbed wire fences. I get to go dumpster diving and play with all sorts of cool gadgets that Q would be proud of.  But usually, I use what is called social engineering to convince the employees to let me in. Sometimes I use email or phone calls to pretend to be someone I am not. Most often I get to approach people in-person and give them the confidence to let me in.  My frequently asked questions include: What break-in are you most proud of?  What have you done for a test that you were the most ashamed of?  What follows is the answer to both of these questions.  A few months ago, a client had hired me to test two of their facilities. A manufacturing plant, plus data center and office building nearby.  First step: open source intelligence, or OSINT. I look at maps, satellite images, study what I can of their delivery and supply schedules, and so on.  The manufacturing facility looked like a prison. No windows, heavy iron gates, no landscaping. Generally a monstrosity of architecture.  This facility had armed guards, badge readers, biometric security controls and turnstiles at every entrance.  I remember thinking, ""It's got to be hell to work in there. I wonder if I can use that…""   One thing was for sure… The chances of tailgating (following behind an employee with valid credentials) into this building were next to non-existent.  I was going to have to get down and dirty with my social engineering.  First stop: LinkedIn. Your LinkedIn is my best friend. The more information you have on your LinkedIn, the more options I have.  I have several fake LinkedIn profiles that you are probably connected to.   I scour profiles of employees who work at these facilities, and cross-reference them to other social media sites. And I find a lovely young woman who I'm going to call Mary.  Mary was a brand-new hire working as an assistant at the manufacturing facility. Mary had a public Facebook account too.  On Mary's public Facebook account, she documented all of her family's adventures.  Side note: Now I know where Mary went to high school, her mother's maiden name, the names of her pets, etc.  Answers to those ""security questions"" you use to reset your passwords are very easy to find if you aren't careful with that information.   Not to mention that now I know where Mary works, where her kids go to school, where they vacation…I could go on. Scary stuff.  This is not an advanced investigation. I'm not a private investigator and I don't have the resources of the NSA. But I can do a lot of damage with simple methods.  Most notably to me, there were photos Mary posted of her time volunteering with a certain maternity support center.  Her passion for children and caring new moms was very plain. So of course, I took advantage of it.   For this assessment I played two roles. For the first, I spoofed my phone number to make it look like it was coming from the company's headquarters.  I called the front desk of the manufacturing facility and was transferred to Mary. ""Hi Mary!"" I said, ""My name is Barbara.""  ""I am a project coordinator with facilities management. We are renovating a few of our facilities. We are sending an interior designer out to you tomorrow so she can put together proposals to update your space!""   Mary replied, ""Well that's great! But why the short notice?"" I could feel her getting suspicious, so I pulled out my trump card…  *Sigh* ""Well Mary… You really should have heard from me sooner. I've just been so overloaded at work…I feel like I can't catch up, and to top it off the baby is due in 6 weeks. If my boss finds out I messed this up he's going to flip.""  I was really getting into this, voice shaking. (Yes, I know, I'm a terrible human being.)  She cut me off, ""Oh hunny, hunny it's ok. We will work this out! Tell me about the baby! Is it your first? Boy or girl?!""  Our Mary was committed at this point. Not because she is stupid, but because she is a good person. She wanted to help me.  We talked babies and birth plans for a while (never pick a pretext you can't speak about at length.)  Mary took down the name of the ""designer"" who was coming by the next day and we said our goodbyes. Mary could have saved her company a lot of heartache by simply verifying that I was who I claimed to be. (Just to be clear here, I would never give out Mary's real identity. I'm not totally heartless. This could have happened to anyone. She has not been fired.)  I showed up the next day as ""Claire"" with a fictional architecture firm that I had made business cards and a website for. My alter-ego Barb had done most of the leg work for me. When I arrived, Mary and her boss were waiting for me with smiles. I shook hands all around and handed them the business card I printed out the night before. I was given a visitor badge and the red carpet was rolled out.  I gained rapport with the staff there by asking them to tell me what they wanted in an office space. They were so excited. I might have claimed to be on the team that put together the Google offices…(Yes, I am HORRIBLE. This is my inner demon child.)  ""You want a standing desk? New chairs over here?! Ergonomic keyboards for everyone! Let's look at swatches!""  We became best buds. I was given complete and unaccompanied access to the facility where I stayed for several hours.  I gained network access and stole several thousands of dollars in physical primitives by picking my way through cheap locks (credit to Deviant Ollam for the rad lockpicking animations.)   This client had been pretty confident that I wouldn't get into either facility, much less be able to hit both in a short time span. So the timeline was left to my discretion, but it was assumed that I would need to fly to the area twice.  I didn't see the need in burdening them with two round-trip expenses.   I went back to Mary's office and said, ""Well I think I have what I need from here. How do I get to the office center?""  She looked at her watch and said, ""It's almost lunch time. I'll take you there!"" A whole group of us piled into the parking lot, and they took me to a nearby taco shop. That's right. My Marks took me to get tacos… I love my job.  After lunch they drove me to the offices and a few of them came in with me to show me around.  I took FOREVER looking around this office space, and eventually they said their goodbyes because they had to go back to work. They had a strict policy of escorting visitors. But I had been seen walking around with trusted insiders so no one questioned me.  I was free to take my time. I made myself at home. My main objective at this site was to weasel my way into private corner offices.  When I accomplished my goals, I tracked down my point of contact's office. This is the man who hired me in the first place. This is the best part of every job.   Steve was there, hard at work when I disturbed his groove by knocking on the door. He glanced up, ""Hi there, can I help you?""  I smiled. ""Hi Steve! I'm Sophie from Sincerely Security. It's nice to meet you in-person!""  I will never forget the look on his face… Pure gold. ""Who?.... Wait, what? How? How did you get in here?!""   We stayed in his office and talked for a long time. I went over exactly the steps that could have prevented my success. First of all, the desire to help others is human and natural. We don't want to discourage that.  Second, I'm sure they did have some sort of policy that required visitors to check in showing government issued identification, but they weren't following it.  We also need to post by every computer, phone and door: ""TRUST, BUT VERIFY.""  An employee who does their homework can ruin my day.  Third, if it seems too good to be true, it probably is.   Is your company going to hire the team who designed Google's offices? Magic 8 ball says no.  Lastly, the team who took me to the second location should have found someone else to escort me through the building.  I've been doing this job for a couple years now, and almost every job is a variant of this story. Very rarely do I go through an entire assessment without some sort of social engineering.  There are ways to protect yourself and your company from attacks like this. I think it starts by sharing stories like these, and educating and empowering each other to be vigilant." "simplicity and roi are often at odds. the simplest plan that also supports a reasonable investment return would have 3 accounts: if you want to get better returns on your investments, things can get much more complicated. here are some optional accounts to consider: besides the mechanics of money flowing between accounts, a budget helps you understand and control your spending.  while there are many methods for this (e.g. envelopes of cash, separate accounts for various types of expenses), the simplest might be using mint.com.  just be sure to put all your spending on a credit or debit card, and you can see your spending by category when you log into mint. it can take a bit to get it set up, and your bank needs to be compatible, but it can give you a really good picture of where your money is going.  once you know that, you can start making decisions like ""i should spend less on coffee"", or ""i should go to the zoo more"", based on how much things cost vs how much you enjoy them. if you feel like your spending is out of control, then you can set yourself hard limits on certain kinds of spending, but usually just watching and influencing your own choices is enough. notes:  if you have a spouse or partner, you should each maintain your own separate accounts. there are many reasons for this including simplicity and roi, besides the obvious. if you feel you must have a joint account, be sure to clearly define how it should be used (e.g. only for paying the utilities) and funded (x$ per month each). particularly with your house, do not do joint ownership. one of you should be a renter and the other a landlord. some of these statements assume you are in the usa. on a personal note, i have about 20 credit cards, 2 checking accounts, 2 ira's, 2 brokerage accounts, and 3 401k's. but i consider myself a personal finance hobbyist, and spend an absurd amount of time chasing financial deals and tax breaks." Account statements and the account information provided by your personal finance software should be coming from the same source, namely your bank's internal accounting records. So in theory one is just as good as the other. That being said, an account statement is a snapshot of your account on the date the statement was created, while synchronizations with your personal finance application is dynamically generated upon request (usually once a day or upon login).  So what are the implications of this? Your account statement will not show transactions that may have taken place during that period but weren't posted until after the period ended (common with credit card transactions and checks). Instead they'd appear on the next statement. Because electronic account synchronizations are more frequent and not limited to a specific time period those transactions will show up shortly after they are posted. So it is far easier to keep track of your accounts electronically. Every personal finance software I've ever used supports manual entries so what I like to do is on a daily basis I manually enter any transaction which wasn't posted automatically. This usually only takes a few minutes each evening. Then when the transaction eventually shows up it's usually reconciled with my manually entered one automatically.  Aside from finding (infrequent) bank errors this has the benefit of keeping me aware of how much I'm spending and how much I have left. I've also caught a number of cashier errors this way (noticing I was double-charged for an item while entering the receipt total) and its the best defense against fraud and identity theft I can think of. If you're looking at your accounts on a daily basis you're far more likely to notice an unusual transaction than any monitoring service. "Disclaimer: This should go without saying, but this answer is definitely an opinion. (I'm pretty sure my current accountant would agree with this answer, and I'm also pretty sure that one of my past accountants would disagree.) When I started my own small business over 10 years ago I asked this very same question for pretty much every purchase I made that would be used by both the business and me personally. I was young(er) and naive then and I just assumed everything was deductible until my accountant could prove otherwise. At some point you need to come up with some rules of thumb to help make sense of it, or else you'll drive yourself and your accountant bonkers. Here is one of the rules I like to use in this scenario: If you never would have made the purchase for personal use, and if you   must purchase it for business use, and if using   it for personal use does not increase the expense to the business, it   can be fully deducted by the business even if you sometimes use it personally too. Here are some example implementations of this rule: Note about partial expenses: I didn't mention partial deductions above because I don't feel it applies when the criteria of my ""rule of thumb"" is met. Note that the IRS states: Personal versus Business Expenses Generally, you cannot deduct personal, living, or family expenses. However, if you have an expense for something that is used partly for business and partly for personal purposes, divide the total cost between the business and personal parts. You can deduct the business part. At first read that makes it sound like some of my examples above would need to be split into partial calulations, however, I think the key distinction is that you would never have made the purchase for personal use, and that the cost to the business does not increase because of allowing personal use. Partial deductions come into play when you have a shared car, or office, or something where the business cost is increased due to shared use. In general, I try to avoid anything that would be a partial expense, though I do allow my business to reimburse me for mileage when I lend it my personal car for business use." Use one journal entry, and split the expenses into the appropriate accounts. This can happen even if you never mix business and personal on the same receipt: say you order office supplies (which where I live are immediately deductible as an expense) and software or hardware (which must be depreciated because they are assets) on the same order. We have an account called Proprietors Loan which represents money the company is lending to the humans who own it, or that the humans are lending to the company. Were I to pay for my personal lunch on a business credit card, it would go through that account, increasing the amount the company has lent me or decreasing the amount I have lent it. Similarly if I made a business purchase with a personal card it would go through that account in the other direction. Where I live, I can lend my company all the money I want any time, but if the company lends me money there can't be an outstanding balance over the corporate year end. If you make two credit card entries of 5 and 10 when you go to reconcile your accounts it will be harder because you'll have to realize they together match the single 15 line on your statement. Making a single entry (your A option) will make reconciling your statement much easier. And that way, you'll probably reconcile your statements, which is vital to knowing you actually recorded everything. You have to track your spending for a month, down to the cent. Without those records, the person trying to help you has no real data. Even a week would be a start.  Heck, try just doing this today.  See if it works for you. Throughout each day: Each evening: At the end of a month (or week, or whatever period you want): Each day you do it successfully it will get easier.  Let us know how it works out!  Best wishes! "Same in childcare, but people are more willing to pay and the work isn't as hard.  So it kind of works out.         I do tutoring on the side and my officemate suggested I get into at home childcare because ""My daycare lady makes BANK! It's so expensive!!!!!"" then I broke down for her how inexpensive those prices really are.  She was shocked and agreed that it's actually a quite low paying gig.         People don't think critically about what they're getting for the money- they just see a huge check written weekly."