How to File Taxes for Babysitting

How to File Taxes for Babysitting
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A typical childcare worker earns an average of ​$12.24 per hour.​ So, if you love kids and intend to earn a living taking care of them, you may want to consider that when making your babysitting schedule.

In addition, you should also consider the tax implications of having a babysitting schedule that enables you to earn a significant amount of money over the year. Currently, if you make more than $400 in net income, you must report your payments to the IRS. So, you need to start thinking of your tax obligations once you have worked at least ​32 hours​ as a babysitter.

How you pay taxes as a babysitter will depend on the work arrangement in place. For example, you may pay taxes as a self-employed individual or as an employee of the family you work for. In addition, different tax rules may apply if you are still considered a dependent by the IRS.

Filing Taxes as a Self-Employed Person

You are self-employed if you use your own tools to run a business as a babysitter. In this case, you will be considered an independent contractor for taxation purposes. And you will need to file your tax return using Schedule C of Form 1040 or 1040-SR to account for your annual personal income.

In these forms, you will declare your babysitting income and claim deductions based on the expenses you incurred while you work. These expenses may include communication, marketing and even transportation costs.

Also, since you are self-employed, you should fill in Schedule SE for self-employed tax purposes so long as you earn more than $400 as a babysitter.

The self-employed taxes are ​15.3 percent​ of your net earnings, tips and wages up to $142,800​ for 2021. And they will include the money you owe for Social Security and Medicare. You will likely have to pay the estimated tax every quarter. However, if you babysat for a relative and your motive was not to make a profit, you may not need to file self-employment tax returns.

In addition, if the client you work for pays you more than ​$600​ in a given year, they should account for their payments on Form 1099-NEC and send you a copy. And that applies to all clients that paid you more than that amount. But even if they don’t send you the form, you must still file your tax returns.

Filing Taxes as an Employee

You could also file taxes as an employee of the parents whose children you take care of. But it would be wise to do so only if you meet the nanny wage test and other definitions of an employee.

Currently, you qualify as an employee if you earned ​$2,300​ throughout the year. In that case, your employer must pay their share of payroll taxes on your behalf, thus leaving you to pay the ​7.65 percent​ you owe for Social Security and Medicare.

In addition, if your employer paid you ​$1,000​ or more in a given calendar quarter, they are also responsible for paying the federal unemployment tax, which is ​six percent​ of the ​first $7,000​ they pay you for your babysitting services. Also, they may need to pay additional state unemployment taxes.

As an employee, your employer should give you Form W-2 by the end of January, which accounts for the Social Security, Medicare and income taxes they have withheld and paid on your behalf. On the other hand, you need to fill in Form I-9 to provide details about your employment authorization. Also, it would help if you filled Form W-4 to guide your employer on how to withhold taxes from your paycheck.

If you earn less than ​$400​, you don’t have to report your babysitting income. However, you should be ready to account for it if you do.

And it would be best to keep all your receipts in case the IRS decides to audit you. That way, you can keep track of your babysitting schedules, what expenses you incurred and what deductions you made when filing your tax returns, thus saving you from headaches later on.