When parents start the interviewing process for hiring a nanny/babysitter there are so many items placed on the checklist to look out for. It is important to make sure to check references, ask about previous training and experience, and of course test the chemistry between the interviewee and the children. Although, there is one item that is commonly overlooked when interviewing your perspective caretaker. Whether or not they are aware that if they earn over $1,800 working for you, the IRS mandates that taxes be withheld.
Crossing the IRS’s $1, 800 wage threshold is not very difficult, especially if you are hiring a nanny to work for you full-time. Many couples make the mistake of ignoring this requirement because they don’t hire full-time nannies. They figure that the few times a month they actually get free time for a date night and hire a sitter can’t possibly mean that they are who the IRS is directing this rule towards. That is entirely wrong.
Assuming you’ve chosen $10/hour as your babysitting wages, let’s review what you need to consider:
Date Night Babysitter. On average when a couple goes out for a night on the town they spend approximately 4-5 hours out. Figuring that you only get the chance to do that once a month, then you have nothing to worry about. That sitter will earn less than $1,000 by the end of the year. The IRS would call this a “casual babysitting exemption.” According to them, with such an infrequent babysitting schedule there is no reason to burden your family with tax rules. Now, if you are one of the lucky ones that get to go out weekly, then this babysitter is sure to make well over the $1,800 mark in which case the tax rules will apply.
The After-school College Student Sitter. Let’s say you employ a young babysitter to care for your children for a few hours during the week to cover the gap between the time school lets out and the time you get home, you are looking at withholding tax because you will surpass the $1, 800 mark after the first few weeks.
Keep in mind that maintaining a sitter “off the books” by paying them in cash all year round, or claim them as an “independent contractor” can potentially become a very expensive mistake. That’s why it’s important to know the basics of household employment taxes in order to stay risk-free and maintain eligibility for employer tax breaks to help offset your costs.