Ethical/logistical dilemma

wisteria
Thu, 03 Aug 2006 12:06:08 +0000

Every kid who babysat should report that income and pay taxes on it. And every parent did so when they were younger, right?



Um, no. If earnings from babysitting and other odd jobs (mowing, etc.) total less than $400 per year, there is no requirement to file or pay taxes on it.



All you selfrighteous folks who hire a local person to mow, clean, babysit etc. are tracking payments to see if you need to withhold income tax, pay employment tax and so forth, right? You’ve hired a household accountant to keep track, right?



I’m not self-righteous, but I filed and paid employer taxes when I hired part-time student babysitters back in the mid-80s. The process was more cumbersome then than it is now (because the IRS has streamlined the procedure and also because TurboTax and TaxCut software can now handle many of the details for you now), but I didn’t need an accountant then. I just called the IRS and state revenue agencies and asked them to mail me the relevant instructions and forms. They were pretty straightforward.

My babysitters thought my insistence on paying them “on the books” was weird, but since I offered to pay both halves of FICA (employee share and employer share), they had nothing to lose.

In fact, reporting and paying their FICA taxes meant that if–heaven forbid–they had been disabled in an auto accident a few years later, they would have been more likely to qualify for Social Security disability payments because they would have had more “covered quarters” of FICA. (This consideration is also relevant to zoosermom’s daughter, by the way.)

The current rule for household employees (babysitters, etc.) is that if you pay $1,500 per year to a babysitter, you are required to file and pay the Federal “nanny taxes” on her. As I said, there is now a simplified and streamlined procedure for doing this right on your own 1040.

Of course, for a business employer like an ice-cream shop, the $1,500 minimum does not apply. The business is required to remit FICA of 15.3% on all employee compensation, no matter how small.

But the law does provide exceptions for casual household employees paid less than $1,500 per year, and they provide exceptions for “self-employment income” of less than $400.



Just remember, this is a friend the OP is dealing with. What is the price of that friendship? Does the OP really want to risk bringing heat on someone who no doubt was well intentioned?



I agree that this is a sensitive topic to bring up, but I think it can be done in a diplomatic and respectful way, just as I did with my babysitters.

I pointed out that it was in everybody’s interest to do things the correct way. (And this can be even more true nowadays, especially if your babysitter or household employee qualifies for the Earned Income Tax Credit, which is essentially a “negative income tax” that subsidizes the wages of low-income workers with dependent children.)

EDIT: As for household workers who mow or clean, if they provide their own equipment and you do not micromanage them and if they work for a number of different clients, they are considered self-employed, in which case filing and paying taxes is their responsibility and not yours. Babysitters are generally considered self-employed only if you bring your child to their house. If the babysitter watches your kid in your house, they are a household employee and you are considered an employer.