<p>You’re under the threshold for INCOME taxes, not social security and medicare taxes. That starts at $400 a year. And the reason to do it is because it’s the law.</p>
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<p>This statement has a greater probability of being true than your former statement.</p>
<p>The threshold in 2009 (and estimated for 2010) is $5,700. This is what the Standard Deduction is on the income tax Forms. Make anything below that and your taxable income becomes wiped out to zero by the Standard Deduction.</p>
<p>If your parents do not claim you as an exemption on their own taxes (which is unlikely if they make any money because they would get a bigger deduction than you would), then you would get another $3,650 under the Personal Exemption, making a total of $9,350 you could make before getting taxed at a mild 10%.</p>
<p>Frankly, if this second part applies to you, you might even be able to make more money without being taxed because you may be able to take the Earned Income Credit, but that is another needless complication probably not worth getting into.</p>
<p>Again, that applies to INCOME taxes. She would still owe Social Security and Medicare taxes on that money. Unless her employer is paying her legally on a W-2</p>
<p>Report her.</p>
<p>The following are the facts:
- You are obligated by law to pay the SS and medicate taxes.
- Most people in your situation would not file the return and would not pay.</p>
<p>What you do with these facts depends on how closely you want to follow the law, and how risk-averse you are.</p>
<p>The OP said she would make $4000 between now and the end of the year. That is not casual babysitting, that’s a nanny job. The people hiring her certainly know the difference even if she doesn’t.</p>
<p>Yes, it may be a nanny job, but she may be hired as a self-employed independent contractor, and thus be responsible for her own social security and medicare taxes.</p>
<p>OP, if you are responsible for those taxes, see if the employers can kick in a bit to help you pay for them. It may be worth it to the employer because the hassle of the employer paperwork may be more than they want to deal with.</p>
<p>If you do determine that you are self-employed, you don’t technically need to start paying the taxes just yet, however you do need to set aside enough money to meet that financial obligation when you complete your tax return in April. After that, if you continue to be self-employed in this way, you will need to pay your estimated taxes every three months.</p>
<p>The IRS considers nannies to be household employees. They’re very clear on this:</p>
<p>[Publication</a> 926 (2009), Household Employer’s Tax Guide](<a href=“http://www.irs.gov/publications/p926/ar02.html#en_US_publink100086722]Publication”>http://www.irs.gov/publications/p926/ar02.html#en_US_publink100086722)</p>
<p>She is under 8K, no need to file. If she did and had taxes withheld she would get it all back anyway.</p>
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One more time, and pay attention this time. There is not INCOME tax liability with that much income. But unless her employer is withholding social security and medicare tax, then she needs to pay that on any income over $400. The OP has already stated that they pay her in cash and don’t withhold anything.</p>
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If she is claimed as a dependent on her parents tax return, which is fairly likely, the cut off is lower than $8k (@$5700 ish I believe) for being required to file a federal tax return. (quite apart from the whole ss and medicare issue).</p>
<p>Ive worked full summers where I have made just under 8K, and when I filed I got every cent of it back. In future summers with new jobs I would tell them to take no taxes, id file and still end up owing noting.</p>
<p>I believe the employer should probably be witholding social security and other state taxes. Also, there should have been deductions from the employees wages for their share of soc security.</p>
<p>There would be a lot higher level of compliance with these requirements if nanny costs were deductible.</p>
<p>The government still has some of my money from my very first job pumping gas… when I was too stupid to realize that if I filed a return I’d get back the federal income tax that was witheld. It took about 20 year for me to think about it.</p>
<p>Thanks for all the input, you’re all very helpful. Do you think it would be a good idea to ask them to start witholding SS/Medicare tax? Then since I make under $5700, I wouldn’t have to file. i don’t want to annoy them though, and they seem cool with the off-the-books deal, or at least they haven’t brought it up.</p>
<p>i’m declared dependent on my parents tax return btw.</p>
<p>Alix, of course they’re willing to have you work off the books. That saves them money and lots of people do it. That doesn’t make it legal. And yes, it will probably annoy them if you bring it up. And yes, it’s quite likely no one will ever know if you do it that way. Which leaves it between you and your conscience.</p>
<p>The other thing to consider is that a person needs so many quarters of payment into Social Security to be eligible to collect later in life.</p>
<p>If she is working as an independent contractor and making more than $600 her employer MUST send her a 1099-misc at the end of the year. In this case SHE must file a tax return to pay her self employment tax (SS and Medicare), although she will not have to pay any income tax. If she is not working as an independent contractor (and the IRS does consider a nanny a household employee and NOT an independent contractor) then her employer MUST withhold SS and medicare from her paycheck as well as paying their portion of the SS and medicare (this is another 7.65% or about $306 on the $4000). </p>
<p>When she files her tax return she will have to identify the source of the income – without a 1099 or a W-2, she will simply have to provide the name and address of her employer. The IRS may or may not come back on the employer, but if they are lawyers they must certainly know that they are breaking the law.</p>