If you have recently hired someone to help take care of your children, you’re likely consumed with working out a convenient schedule, required duties, an agreeable rate, and best method of payment. However, taxes are another thing that should be on your mind as either the babysitter or the parent or guardian who is the employer.
Here are some important things to know about babysitter taxes and how to best pay them to be compliant with state and federal laws.
Paying Self-Employed Babysitter Taxes
An initial determination that you’ll need to make is whether your child caregiver is self-employed or a household employee. Babysitters who provide their own equipment and control how their work is performed are typically considered to be self-employed. A babysitter who is self-employed is required to report babysitting income to the IRS. The person who hired a self-employed babysitter does not have reporting or withholding requirements for taxes.
However, most babysitters who provide regular services in a home are considered to be household employees. You would need to provide your household employee babysitter with a Form W-2 if you paid him or her at least $2,400 over the course of the tax year or if you withheld federal tax while paying your employee any amount. The threshold was $2,400 for 2022 and $2,300 for 2021, so it is subject to change from one year to the next.
Do Babysitters Have to Pay Taxes?
Yes, as a general rule, babysitters do have to pay taxes. If you have earned at least $400 as a babysitter during the tax year, then you are required by the IRS to report this income.
Tax authorities typically do not make a distinction among babysitters, nannies, and other childcare providers. With regard to tax obligations, it also doesn’t matter whether you babysit for children in your home, in someone else’s home, or in a different location. There is an exception, however, for babysitters who are under 18 years old. State and federal governments want to receive tax money quarterly for these types of arrangements, rather than all at once in the springtime.
How Much Can You Pay a Babysitter without Paying Taxes?
Employers should issue a 1099 form if they paid a babysitter $600 or more during the year. According to tax law in 2022, babysitters are considered to be household employees if you paid them $2,400 or more. If you paid a babysitter who is 18 years or older at least this amount, you must withhold employment taxes.
Employers collect and pay a portion of Social Security and Medicare taxes on behalf of their babysitters. Employers also report wages to the Social Security Administration, as well as Federal Unemployment Tax if they pay over an established amount during any quarter of the tax year.
How to Best Handle Babysitter Taxes
If all of this information about babysitter taxes is making your head spin, you’re not alone!
Tax law is complex to deal with as an employer, employee, or self-employed person. One of the best ways to deal with babysitter taxes is to consult a tax professional who is knowledgeable about the most current tax laws and can help you minimize your tax burden and comply with the law so that you are not subject to an audit.
To make this process easy and convenient, Pavillion Agency offers household employee payroll services to help you handle the tax process for your domestic employees. Through Pavillion Agency, we offer tax compliance and reporting services, payroll process, benefits consultation and administration, workers’ compensation and disability and insurance compliance services, and more.
How Pavillion Agency Can Help
Contact us today at 212-889-6609 or info@pavhr.com for more information on how Pavillion Agency can assist you with nanny or babysitter taxes.
