Babysitters Taxes

10 Reasons to Think About Taxes for Your Babysitters

Back in the day, it was a rarity for “taxes” and “babysitters” to even come up in the same conversation. Parents knew which kids on the block were available, and the numbers were so small that nobody thought about taxable incomes, but that is no longer the case. Two-income families have become a norm in these tough economic times, which means that professional child-care is needed on an unprecedented scale. Whether a family hires a nanny or an au pair or a babysitter there will be certain tax consequences, and it will serve the family well to know what is going on. Below are some of the items and issues that will surface during any relationship with a professional child-care provider.

Note here that this is not tax advice, but a strong suggestion that you seek professional help. If you aren’t an expert yourself you will be wise to find yourself a tax pro, someone who can help you navigate these potentially treacherous financial waters.

  1. Tax Professional – Already mentioned above, the tax professional still gets top billing on this list. The importance of keeping your taxes straight cannot be over-emphasized. In recent years the IRS has hired thousands of new auditors, and it might be wise to have a pro working on your behalf in order to help reduce the likelihood of an audit.
  2. Your Records – When you hire household help you incur a record-keeping burden. You will need to organize your records so that you and/or your tax professional can make sense of the numbers.
  3. Babysitters Records – Your sitter may earn enough in a year to require the filing of income tax. All or part of this income may come from the sitting job, but it is important that accurate records are kept.
  4. Babysitters Parents – Your sitter may be young enough to be claimed on a parent’s tax return, so it will be necessary for them to know how much their child is earning.
  5. Babysitting Service – If you work through an agency rather than with an individual, the company you choose will want accuracy for handling their own tax responsibilities.
  6. Elderly and Social Security – Sometimes a babysitter may be a senior citizen who is collecting retirement benefits or Social Security. Eligibility may be affected by babysitting earnings, so it is important to maintain proper records.
  7. Future – When you see the overall costs and benefits of utilizing a sitter, it can help you to better plan for the future.
  8. Withholding Thresholds – Depending on how much you pay your sitter over the course of the year, you may incur responsibilities as an employer. There may be withholding requirements.
  9. Unemployment – You may have to deal with unemployment insurance when you hire a sitter, and this is another area where your tax professional may be indispensable.
  10. Under the Table – There is a great temptation to just hire someone “under the table” in order to avoid paperwork and expense, but there are some problems to this approach as well. First, you may be breaking the law, and. . .well, that should suffice.

Finally, and for at least the third time, find yourself a tax expert if you aren’t one yourself and you don’t already have one.