You know you have to pay taxes for your full-time nanny, but what about that after-school sitter who watches your daughter for two hours after school? Or the housekeeper who cleans your house once a week? Or that girl up the block who entertains your kids while you and your partner head out on your weekly date night?
“If you hire a part-time caregiver who doesn’t work through an agency or owns their own company – and if you give specific instructions on what work you want done and how – that person is considered a household employee, not an independent contractor,” says Tom Breedlove, Sr. Director of Care.com HomePay.
And if you pay that person $2,100 or more in a calendar year, you’re responsible for withholding taxes from your part-time caregiver and paying employment taxes of your own.
Learn more about nanny taxes and your responsibilities >>
Taxes can be confusing, so here are a few answers to common questions that people have about paying taxes for part-time help.
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What If She Only Works a Few Hours Each Week?
Believe it or not, it doesn’t really matter how many hours your caregiver spends working for you — it’s about the money, not the time. The IRS takes notice if she goes over a certain financial threshold and performs her job according to specific definitions. If you pay your caregiver $2,100 or more in any calendar year, you have household employer tax responsibilities. That means withholding taxes from your caregiver’s pay and paying your share of employer taxes.
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What Types of Caregivers Qualify?
Pretty much anyone who you pay $2,100 or more to. For example, your summer nanny may only work for you 10 weeks out of the year, but she’s likely to pass that threshold for paying taxes. If you go out on the town every Friday, your date night babysitter may also qualify.
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What if You Share an After-School Sitter?
If you hire someone to watch your kids every day after school while you’re at work and your neighbor also pays for the same service, you will have to pay taxes for the sitter if that $2,100 threshold is met. If, however, you have three different people who do it and you don’t pay any of them $2,100 or more in a given calendar year, you’re not responsible for withholding taxes from any of them. (If you pay a total of $1,000 or more in a calendar quarter, you will have to pay unemployment insurance taxes).
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What If You Hire Your Summer Nanny for Full-Time Work?
“Lots of families get into trouble when their caregiving situation changes from part-time to full-time,” says Breedlove. “You really need to keep track of the earnings of anyone you employ, so that you’re aware when you cross the $2,100 tax withholding threshold.”
You don’t want to discover in December that your housecleaner has already earned $3,000 for the year. You’ll have to scramble to establish federal and state IDs and file back tax returns with the state — all before your January deadlines.
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Do I Have to Pay Taxes for My Housekeeper?
If you hire someone to deep clean your home once a year before the holidays, that person is most likely not your employee and you aren’t responsible for taxes. If, however, your housekeeper comes over to your home three times per week on a schedule that you set, you may need to check her earnings to see if her payments land her above the threshold.Learn about the 8 Additional Services Housekeepers Can Perform
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What if I Pay My 16-Year-Old to Watch Her Brother After School?
If you pay your spouse, your child under the age of 21 or a parent more than $2,100 in a calendar year, you don’t need to pay household employment taxes for them. But they’ll still need to claim that money on a personal income tax form.
Now that you know you have to pay taxes for your part-time caregiver, where do you start?
Your Next Steps:
- Learn what you should be paying your sitter
- Set up a payroll account
- Read about child care tax breaks
* The information contained in this article should not be used for any actual caregiver relationship without the advice and guidance of a professional advisor who is familiar with all the relevant facts. The information contained herein is general in nature and is not intended as legal, tax or investment advice. Furthermore, the information contained herein may not be applicable to or suitable for your specific circumstances and may require consideration of other matters.
