Q. We have a regular babysitter. Most weeks she watches the children 3 afternoons/evenings a week, just until I get home from work, so my wife can attend classes. We only pay her $200 a week. I have heard about "nanny taxes" but since she is not full time or a real nanny, that doesn't apply to me, right?
A. This is a common question, and unfortunately in almost all cases the answer is YES, the "nanny taxes" do apply to you.
Here is the reality. According to the IRS, if you hire someone to do household work for you and if you control, or have the right to control, what work is done, and how that work is done, this person is your employee and you have employment tax obligations, the group of taxes often referred to as the "nanny taxes."
It does not matter whether you give your babysitter great latitude, but rather that you have the right to control the work. Your household worker can work on a full time or part time basis. It does not matter whether the worker lives with you or not. You may pay hourly, daily or a salary. It does not matter how the employee refers to herself or how you refer to him/her in an employment contract.
What is household work?
Household work is defined as work done in or around your home. Examples include:
- Babysitters
- Senior Caretakers
- Housekeepers
- Maids
- Cleaning Person
- Nanny
Example: You pay Mary to watch your child and do light housework five days a week in your home. Mary follows your specific instruction regarding your child's diet, activities and household duties. Mary is your household employee.
Some workers are not your employees
If only the worker controls how the work is done then the worker is not considered your employee, but is self-employed. Someone who performs child care services in his or her own home is not your employee. A maid who is paid by another company to clean your house or a worker that an agency provides and pays directly are not your employees.
Example: You hire ABC Maids to provide weekly house cleaning services and make all payments to the service. They provide their own tools and supplies and hire their own help, although you do request that they use your vacuum in the house. The cleaning person sent to you home is not your employee.
Occasional Babysitters: If your occasional child caregiver is 17 years or younger AND a full time student, or if you will not pay your babysitter more than $1800 in the full year (that is less than $35 a week!) you may be exempt. IRS Publication 926 has more details.
Have more questions about self-employed babysitter taxes? We offer free telephone consultations and welcome your phone calls. We also encourage you to download the household employer guide linked below - this free publication will help you understand your responsibilities for your household workers.