Do i need to report babysitting income

Babysitting is often the first job many young people have. Taking care of siblings or neighborhood children for extra pocket money is somewhat of a rite of passage. However, did you know that babysitters, even those paid in cash may be required to file income taxes on their babysitting earnings? As far as the IRS is concerned, income is income, and it does not have to be paid to you in the form of a paycheck from a business. In order to find out if you need to file income taxes on babysitting income, you must first determine your employment status, and whether or not you have reached IRS income thresholds for the year.

Tips

• If you received cash during your employment as a babysitter, you are still required to report this income to the IRS. Failure to report cash income, particularly if it pushes you beyond the income level required for mandatory filing, can result in serious penalties from the IRS.

Paying Taxes on Babysitting Income

If you are a self-employed babysitter, the payer may not give you a 1099 because the services you provide are personal in nature, so he is not required to do so. Rather, 1099s are generally supplied by a person paying an independent contractor in the course of providing services for his business, and not for personal services received. But, just because you do not receive a 1099 from a payer, doesn’t mean you are off the hook for paying taxes on babysitting income.

If you’re self-employed, you are responsible for reporting this income yourself and paying self-employed babysitter taxes. Any self-employed income you receive from babysitting – in excess of a net $400 per tax year – must be reported at tax time on Form 1040, Schedule C or Schedule C-EZ. While you aren’t obligated to file a return with the IRS if you net less than $400 in a given tax year, it is still a good idea to do so. You may be eligible for a refund.

However, if you work in the capacity of a household employee and you earn more than $2,000 in any given tax year, then your employer is responsible for withholding income taxes, Social Security and Medicare from your paycheck. He is also responsible for supplying you with a W-2. You then take the information from your W-2 and report this income on Form 1040 or Form 1040EZ. Form 1040EZ is a simpler, easier version of Form 1040 that allows you to file your taxes with less hassle when paying taxes on babysitting income.

Defining Your Employment Status

A babysitter can be either a self-employed contractor or a household employee depending on the scope of her duties. Determining employment status, in this instance, hinges upon a couple different things. First, the distinction between a household employee and an independent contractor comes down to how she performs her job. Do you have autonomy to perform your babysitting tasks? Then you’re probably considered self-employed. If the people for whom you’re babysitting decide how and when you perform your job, you’re more than likely a household employee.

For example, on occasion, you watch your neighbor’s child while she works a second job. If she leaves her child with you but doesn’t give you too many instructions, then you are largely responsible (within reason) for how you take care of the child. This is considered self-employment. On the other hand, if you receive detailed instructions such as when to pick up the child from soccer practice, when and what he must be fed, how long he should practice the piano or when he has to be in bed, then you would be considered a household employee.

Another difference between self-employed or household employees lies in how this income is reported to the IRS by the payer. Household employees receive a W-2 from their employer to report these earnings, while self-employed babysitters might receive a 1099.

Some caregivers make a great living working for many families instead of just one. Maybe word in your neighborhood is that you’re a reliable date night sitter and you work for two or three families every weekend. Or maybe you juggle two part-time nanny jobs — one in the morning and the other in the afternoon. Maybe you have a niche for connecting with older people and assisting with household chores and errands around their home. While being hired for so many jobs is great, it can be confusing trying to figure out what your tax responsibilities are.

“Just because you aren’t a full-time employee with one family doesn’t mean you don’t have to pay taxes,” says Tom Breedlove, Sr. Director of Care.com HomePay. “The IRS says if you earn $2,600 or more from any family in a calendar year, and you don’t own your own business or work for an agency, that family should be withholding taxes from your pay and paying their share of taxes as well.”

If you don’t earn that much from any one family, they don’t have any tax responsibilities toward you. However, you still need to claim the earnings on your personal income tax return as household employment wages. To help make things a little more clear, here are three scenarios that you may find yourself in as a part-time caregiver.

1. You work for several families off and on throughout the year

You might work for 10 families in a given month, but as long as one of those families doesn’t pay you $2,600 or more over the course of the calendar year, you won’t have to worry about having taxes withheld from the amount any of these families pay you. “It’s a good idea to keep track of what you earn from each family so you have a running total of your income for the year,” suggests Breedlove.

At the end of the year, you’ll simply add up the total amount of money earned from all the families you worked for and claim it as household employment income. You’ll see this total amount appear on Line 7 of your personal income tax return if you’re using tax preparation software.

2. You earned $2,700 babysitting for one family this year

Even if it’s only a little bit over the limit, the IRS requires the family to pay taxes on your earnings. And even if they want to pay you under the table, it’s in everyone’s best interest to follow the law.

If the family is ever audited, they could be fined for failing to pay taxes and file tax returns for a household employee. And, as an employee, being paid legally helps you build up an employment history that can be verified — which is important for things like taking out mortgages and car loans — and you will build credit toward Social Security and Medicare benefits for your eventual retirement.

3. Your part-time job turned into a full-time job

Just as your job changes, your tax status will very likely change when your work goes from part-time to full-time work. If your sporadic job suddenly becomes much more regular, your earnings will increase and you’ll probably reach the $2,600 threshold quickly. You’ll need to talk to your employer about how your taxes will be paid. It might be more of a hassle at first, but will pay off for both of you in the long run.

No matter how your work schedule comes together, it helps to know what tax rules and regulations you need to follow. Monitoring your changing income will help both you and your employer(s).

Your Next Steps:

• Learn about the benefits you receive by being paid on the books

• Read more about the tax and payroll process for caregivers

• Find a part-time caregiving job

* The information contained in this article is general in nature, may not be applicable to your specific circumstances, and is not intended to be a substitute for or relied upon as personalized tax or legal advice.