The Internal Revenue Service considers income you receive in exchange for work to be earned compensation that you must report when you file your federal income tax return. If you are paid for providing child care, you have earned income that must be reported. If you are not an employee of the person paying you for providing child care, the Internal Revenue Service considers you to be a self-employed child care provider or babysitter.
Child Care Provider
The IRS requires you to include with your income any pay you receive in exchange for providing child care, regardless of whether you provide the service in your home, the client's home or in some other place of business. The IRS notes that you are typically not considered an employee of your client unless you are subject to the client's will and control. If you are not considered an employee, the IRS considers you to be self-employed.
Babysitters and Child Care Providers
The IRS includes babysitters with child care providers for the purposes of reporting income for federal income taxes. The rules for child care providers apply regardless of your age. The rules for child care providers also apply regardless of whether you provide babysitting services on a regular or periodic basis.
Reporting Your Income
The person you babysit for should provide you with a Form 1099-MISC if she pays you more than $600 during the tax year. You are required to report any income you receive from babysitting, regardless of the amount, regardless of whether you're paid by cash or check and regardless of whether or not you receive a Form 1099-MISC. Babysitting income is usually considered self-employment income, which must be reported on Schedule C of IRS Form 1040.
You must report your earnings from babysitting as self-employment income, but you may also deduct certain expenses associated with your self-employment. You may be able to deduct any supplies you provide that are essential to performing your babysitting job, whether that's snacks you purchase for the kids you watch or materials like markers and construction paper for them to play with. You may be able to deduct expenses for business cards, an online presence or other advertising associated with your babysitting job. You also may be able to deduct transportation costs of getting to and from your client's home.
In addition, you can use self-employment income from your babysitting job to fund your individual retirement account.