All income that is not specifically exempted from taxation by law is taxable income, and that includes money earned by babysitting. The same rules and regulations that apply to any other kind of income apply to babysitting income, which has pros and cons. For example, even a teenager who earns money babysitting might have to pay federal income taxes, but she can also use that earned income to fund a tax-advantaged individual retirement account.
Filing Requirements - 2017
Whether you have to file a federal income tax return on your babysitting earnings depends on a number of factors, including your filing status, your dependency status, and the total amount of your earned and unearned income from all sources. For example, if you are single, your parents claim you as a dependent and you have only earned income, your income is non taxable until your income reaches $1,050 as of the 2017 tax year. If you are a single adult, and no one claims you as a dependent, you may have to file your taxes for any self-employment income over $400. If you're a babysitter employed by a service, you'll most likely file with a Form 1040A. If you're self-employed, then you are required to file a Form 1040 and report your income from babysitting on Schedule C.
Filing Requirements - 2018
The same rules apply as in 2017, but the income requirement is substantially different. For the 2018 tax year, you aren't required to file a tax return unless your earnings exceed $12,000. The self-employment minimum remains at $400.
The Internal Revenue Service considers any income you receive in exchange for performing a personal service to be taxable income. It does not matter what the personal service is, or in what manner the income was paid. As long as the income was available to you, whether or not you actually have it in your possession, it is subject to federal income taxation. For example, if you receive cash in exchange for babysitting for a neighbor, that cash is taxable income. If the neighbor pays your way to the movies in exchange for your babysitting service, the IRS considers the value of the movie ticket to be taxable income.
The IRS considers babysitters, regardless of their age, to be child-care providers, and the same rules that apply to child-care providers apply to babysitters. The IRS does not make a distinction between where the child care is provided. You must include any compensation you received for providing child care, or babysitting, regardless of whether that care was provided in your home, in the child's home or at another location.
Babysitter as Employee
If the person you babysit for has the right to control what you do, when you do it and how you do it, the IRS might consider that person to be your employer. How your babysitting income is reported and taxed is different if you work as an employee than if you work as an independent contractor. If you work as an employee, the person you work for should provide you with a W-2 detailing how much you were paid during the year, as well as how much money was withheld for such things as Social Security, Medicare, retirement benefits and any other withholdings. You should report your babysitting earnings along with your other wages, salaries and W-2 earnings on Line 7 of Form 1040.
Babysitting as Independent Contractor
The IRS considers you to be an independent contractor if the person you babysit for does not have the right to control what you do, how you do it or when you do it, even if they have the right to direct the results of your work. If you babysit only on an irregular basis, you are likely an independent contractor. The person you babysat for would not withhold any money from your pay. If you earned more than $400 per year from one person, she should provide you with a Form 1099-MISC. You must report all of your income for babysitting as an independent contractor on Schedule C, Form 1040, regardless of the amount and regardless of whether you receive a Form 1099-MISC. As an independent contractor, you will be responsible for paying self-employment taxes as well as income taxes on your babysitting earnings.
While your babysitting income might not be subject to federal income taxes, you might still have to pay self-employment taxes. According to the Internal Revenue Service, you must file Schedule SE and pay self-employment taxes if you had net earnings from self-employment of $400 or more. Self-employment tax rules apply regardless of your age.
Mike Parker is a full-time writer, publisher and independent businessman. His background includes a career as an investments broker with such NYSE member firms as Edward Jones & Company, AG Edwards & Sons and Dean Witter. He helped launch DiscoverCard as one of the company's first merchant sales reps.