Can a local government declare you a "business" and charge taxes from income for caring for your own mother in your own home?

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We have been caring for my mom for the past 3 years in our home. My dad has paid me some money for this. We have always
paid our state and federal taxes on this income. Recently, our "local government" sent us a letter saying we are a "business" and must pay back taxes and penalties for our income from my mom's care. We had no idea we were a "business". Can they do that?

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Much depends on the amount of money you are getting paid (I would think). I think you need to see a business attorney about this, since all local governments are different. Please get legal help before you end up with a real mess. Good luck. This seems very odd that they would consider you a business, but I suppose they could. Please let us know how this turns out. There are many people in your situation.
Carol
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Caring for your mother in your home is not a business in of itself. If your mother pays you for the care, it is considered self employed income (and expenses you pay for her care are deductions from the income) that you would report on Schedule C of your tax return. If she gives you gifts unrelated to the care, the gifts are not income. But if she pays you regularly and her intent is to compensate you for the care, you should report it as income.
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Oh good grief! Maybe technically you are a "business" in your municipality. As Carol says, see a lawyer, because you sure don't want tax trouble on top of being a caregiver.

But really, shouldn't the government on all levels be doing absolutely everything it can to encourage keeping elders and handicapped persons in the community? If there are family members willing to be caregivers and keep someone out of the long term care facilities, they certainly should not face tax penalties for doing it!

Do what you have to do to stay out of trouble, but this sure pushes my hot button about the "family values" politicians yammer about.
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Where I live when I was self employed I had to pay self employment tax along with federal income tax, state taxes, and the 1% earning tax to my local government. So yes if you paid federal and state taxes on the money especially if it was more than I think like 600$ then you owe your earning tax. Good luck
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No, you are not a "business". In order to be classified as such, you first need a business license. \
See Schedule C on the IRS.Gov website, or better yet, purchase TurboTax Deluxe and follow the prompts on elderly care or care of a dependent.
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I used to know a lady who did commercial layout art for a living. She did the art at home and mailed it to her employer. NO people came to her home in connection with this. But she got in trouble with the local authorities, who said she was operating a business in her home in an area that wasn't zoned for businesses. This kind of thing can be a royal pain. Good luck!
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I agree with what Jon wrote. I have a small business. The taxes I make on the income are the same or a little less than I would make if my money came from wages. If you have been paying income taxes on the money paid to you by your parents, your income tax burden will not be great. The greater concern will be the 13.2% self employment (SE) tax for social security that will be due if you have not paid that.

The IRS is very reasonable to work with. There may be some extra taxes and penalties, but you can work things out with them. Good luck.
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I don't think that we are talking about the IRS here, or about federal definitions. This is a local government, right?
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Yes I believe we are if I understand her correctly which is why she probably does owe it. In the city where I live if you work or live in the city you will have earnings tax deducted from your paycheck. It is also referred to as a locality tax. If you are self employed you pay the city tax/earning tax/ locality tax directly to the city at the end of the year. Or you can make payments through out the year it depends upon how the city want you to pay it. Good Luck
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Careformom please disregard previous posts. I did not realise how old your orginal post was. I hope that everything worked out for you.
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