Full Guide to Babysitter Taxes: Tax Types, Exemptions, & More

Babysitter taxes (or babysitting taxes) are a type of tax levied on wages or salaries paid to a nanny, child care worker, or hired caretaker for children and qualified dependents.

As long as a babysitter’s income reaches the tax filing threshold, they must pay taxes on their earnings, regardless of whether they work full-time or part-time.

There is more to uncover about how babysitter taxes work, from the differences when it comes to nannies who are considered employees to self-employed childcare workers. With that being said, if you want to learn more about the babysitter tax, this article will serve as your guide.

Let’s delve right into it!

Key Takeaways

• Babysitter taxes apply if a nanny earns over $400 in a calendar year, or at least $2,700 for full-time babysitters and a minimum of $600 for self-employed nannies.
• Families hiring babysitters may use either the Child Tax Credit or Dependent Care Account to write off childcare-related expenses from their taxable income.
• A babysitter is usually considered a household employee by the Internal Revenue Service, but it is also possible for them to work as independent contractors.
• Minors who take on babysitting jobs may be required to pay taxes if their income exceeds the $14,600 standard deduction or the $400 minimum threshold if they’re self-employed.

Do Babysitters Have to Report Their Income?

Yes, babysitters must report their income, particularly if they earn more than $400 annually in exchange for their services.

As a general rule, all types of compensation, whether earned by employees or non-employees, must be enumerated and reported to the Internal Revenue Service for transparency purposes.

Moreover, incomplete information on your annual taxable income cannot go unnoticed and could mean a possible IRS audit. The income threshold is $2,700 for cash wages paid to babysitters.

That means that if a family or employer pays their nanny at least the set threshold or more, they must pay Medicare and Social Security taxes. The taxes levied on babysitter income are also collectively referred to as nanny taxes.

What Taxes Babysitters Might Have to Pay?

Babysitters must pay self-employment tax, FICA taxes, and federal income tax regardless of whether they fulfill their jobs as independent contractors or as employees. They may also have to pay state income taxes, depending on their work location’s tax regulations.

The self-employed babysitters are responsible for paying FICA (Medicare and Social Security) taxes. Since they are independent contractors, they must pay the full 15.3% FICA taxes, or the combined 12.4% for Social Security and 2.9% for Medicare.

However, if a nanny or child care worker is an employee, then they share the FICA tax burden with their employer and pay 1.45% each for Medicare and 6.2% for Social Security tax.

Aside from FICA, federal and state income taxes also come into play when specifying a babysitter’s tax obligations.

Self-Employed Babysitters vs. Babysitters as Household Employees

It is important to differentiate between self-employed babysitters vs. babysitters identified as household employees or workers hired to complete tasks within their employer’s residence.

In doing so, families who hire their services can determine the extent of their responsibilities when compensating nannies and assisting them in managing their babysitter taxes.

The table below summarizes the key points to take into consideration when determining a babysitter’s employment status:

W-2 Form vs. 1099 Form for a Babysitter

Determining when to use a W-2 vs. a 1099 form when filing babysitter taxes is essential to avoid issuing the wrong IRS form, as that could result in the nanny having to amend their returns later on.

In general, the IRS considers babysitters as W-2 employees since their work arrangements are usually decided by the family who hired their services.

If the babysitter has to follow a specific work schedule, receives regular pay, and has their employer withhold a portion of their salary to pay for their taxes, then they should expect to receive a Form W-2 on or before January 31st.

While it is more common for nannies to receive a Wage and Tax Statement, it is still possible for them to receive a 1099 form if they earn at least $600 in self-employment income. In this scenario, the babysitter should receive Form 1099-NEC, Non-Employee Compensation.

On the other hand, a self-employed nanny who works for multiple clients and earns at least $600 from their freelance babysitting gigs may receive a Form 1099-K if they are compensated via payment apps.

Payment apps and payment card companies must issue a Form 1099-K to their app users and customers if they receive at least $600 in payment within the calendar year through their services.

Paystub.org Lets You Prep Your Tax Forms With Ease

Paystub.org’s 1099 form and W-2 form generators are cost-effective and must-have tools to aid you in your tax filing process. Our generators are secure and complete with all the relevant information needed to report your withheld taxes and annual taxable income.

You can also take advantage of our generators’ built-in calculators to compute your babysitter taxes with ease. For families hiring babysitters and household employees, you can also try our paystub generator.

Just like our tax form generators, our pay stub generator comes with ready-made templates that you can easily fill out in just minutes. It’s quite a handy tool for when you need to disburse employee salaries or record your income and deductions for tax filing purposes.

5+ Essential Babysitter Tax Exemptions

The different types of babysitter tax credits can be used by either families hiring nannies or self-employed babysitters. For self-employed nanny tax deductions, freelancing babysitters can claim the following types of expenses on their tax returns:

• Business advertising costs. If you advertised your services or created and distributed business cards to promote your babysitting services, you can write off the advertising expenses you incurred to reduce the taxes you owe.

• Phone services. Babysitters who use their cell phones to communicate with their employer may itemize their phone data subscription costs, wireless connection expenses, and other communication services that they use to fulfill their services.

• Vehicle insurance and maintenance. Claiming vehicle insurance and maintenance expenses apply if you use your vehicle to travel to your client’s residence or fetch the children to and from school.

• Travel expenses. Aside from expenses related to the use of your vehicle, you can also deduct travel expenses to your place of work, particularly if you have to commute to work.

There are several other tax write-offs that babysitters can claim, and these write-offs are also known as tax deductions for independent contractors.

Meanwhile, families or households hiring nannies may qualify for the following babysitter tax deductions:

• Child Tax Credit. Also called Dependent Care Tax Credit, this babysitter tax write-off lets families itemize all childcare-related expenses, including salaries paid to their nannies on their returns. Households with a single child can receive up to $3,000 in tax credits, while families with two or more children can claim up to $6,000 in childcare expenses.

• Dependent Care Account. The Dependent Care Account is an employer-sponsored Flexible Spending Account (FSA). It allows employees who hire nannies to look after their kids to cover up to $5,000 of babysitting and other childcare-related expenditures on a pre-tax basis.

What Are Employers Obligations: 4 Best Practices

An employer’s obligations when it comes to babysitter taxes have to do with ensuring that their nannies are paid the right wages and compensated on time.

They must also issue their employees’ W-2 forms on or before the set deadline to give their workers more time to review and calculate their annual wages, withholding taxes, and other deductions.

Before furnishing Wage and Tax Statements, an integral part of an employer’s responsibilities is having their nannies fill out Form W-4, Employee’s Withholding Certificate.

The said IRS form provides information on a worker’s tax filing status, social security number, and personal information. It helps employers determine and estimate the correct babysitter taxes to withhold from their nanny’s income.

On the other hand, it can be overwhelming to take care of all the wage, labor, and tax obligations that come with hiring a household employee or a freelancing babysitter.

That said, we’ve prepared a couple of tips to help you better manage babysitter tax and salary obligations.

4 Tips for Paying and Managing Babysitter Pay

The tips for paying and managing babysitter pay focus mainly on maintaining an organized process while also being mindful of the specific federal regulations and laws in your area regarding babysitter taxes and employment.

That said, here are some crucial factors to consider to ensure babysitters are compensated properly:

• Follow federal and state tax due dates. Failing to follow IRS and state deadlines leads to a ripple effect of possible penalties. In fact, nannies can face late filing penalties and incur tax debt if they don’t file a W-2 form on time.

• Choose a payment method. Discuss possible payment methods with your babysitter for transparency and convenience purposes. Some employers choose bank deposits, while others use mobile payment applications.

• Set up a payroll system. It is also ideal to have an organized payroll processing system. That way, you can establish a pay schedule that adheres to important salary and tax deadlines, and you avoid forgetting to compensate your babysitter.

• Specify the work setup. Take time to assess whether you need a full-time babysitter or a freelancer so you can negotiate on the salary rates and prepare the correct tax form later on.

How to Handle Babysitter Taxes as a Minor in 3 Easy Steps

To handle babysitter taxes as a minor, you first need to know whether minors have to pay taxes. The answer is yes; minors must pay taxes if their earnings from babysitting exceed the $14,600 standard deduction for individual taxpayers.

Self-employed minors are also required to pay Medicare and Social Security taxes if they earn at least $400.

If a babysitter happens to be a minor whose earnings qualify them for federal and state tax withholding, here’s what they and their employer should do:

#1. Gather the Necessary Information

Their employer should have them fill out a Form W-4. At the same time, they must communicate with the minor’s parents to fully assess their eligibility for certain tax deductions.

#2. Prepare the Correct Tax Form

Since minors below 18 have restricted work hours, according to the US Department of Labor, this makes them independent contractors. In that case, employers should issue a 1099-NEC to minors they hire to do babysitting tasks.

#3. Use the IRS Free File

Minors can take advantage of the IRS Free File program to file their taxes for free. They can also browse the Internal Revenue Service’s trusted online tax preparation software partners to help them calculate the taxes they owe.

Final Thought

Babysitter taxes are pretty simple and straightforward. The withholding tax rates, applicable tax deductions, and tax filing deadlines are the same as those of regular taxpayers’.

As an employer or a family hiring a nanny’s services, it is important to stay on top of your obligations when it comes to managing babysitter taxes and upholding your babysitter’s labor rights.

On the other hand, if you earn money by babysitting, you must decide whether to pursue the said occupation full-time or part-time.

The key is to help your employer evaluate your tax situation accurately and make the necessary adjustments in your wages, benefits, and deductions.

Babysitter and Nanny Taxes FAQ

#1. How to file taxes as a nanny “paid under the table”?

The key to filing taxes when you’ve been “paid under the table” is to backtrack all income paid to you from the beginning of your employment or work. If possible, record all your wages and include any benefits and incentives provided by your employer.

It is crucial to work closely with your employer or client to retrace all your wages as accurately as possible. You can also use our online pay stub generator, as well as our W-2 form generator, to help you calculate the federal, state, and local taxes you owe.

#2. How to prove babysitting income?

To prove babysitting income, you must have proof of income—copies of paychecks or pay stubs issued to you by your employer or bank statements that show your earnings deposited into your bank account.

You can also use the W-2 form sent to you by your employer to prove that you were paid wages in exchange for your childcare services.

#3. Is babysitting considered self-employment?

Yes, babysitting is considered self-employment if the nanny has full control over their work schedule and arrangements. Otherwise, if the employer decides the nanny’s work hours, scope of tasks, and work schedule, then they are considered a household employee instead.