Thanks, will try here for a fast and simple answer. Last year my daughter became pregnant and was terminated from her job (that is a diff matter) So, I started paying her $100 a week to answer the phone, do some billing etc. for my in home business. She made $5200 working for me in 06. Can I provide her with a W2 although I didn't take any taxes out or will I have to 1099 her.
Reason being is that the more she makes the more she gets for EIC.
She sounds like an employee, so you should be withholding and giving her a W2. You can backfile all your quarterlies and pay the penalty, or you can make the case that she is an independent contractor (if a case can be made) and give her a 1099 for the income. Not really enough info to make a good recommendation.
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