How to Report Babysitter Income on Taxes

Many people think teenage babysitters are exempt from taxes. However, you must report your babysitter's income and pay Social Security taxes on it if you pay her more than $1,700 per year. If you fail to do so, and the IRS audits your return, you might have to pay substantial penalties and interest. Report all wages you pay your babysitter on Schedule H and include it with your annual income tax filing each April.You must also provide the babysitter with a W2, so that she can report her income and claim any credits due on her taxes.

Instructions

1. Pay your babysitter by check. If you pay him in cash, give him a receipt for the payment and keep a copy of the receipt for yourself. Each time you pay him, record the amount of the payment in a record book. In January of each year, review the records for the previous tax year and compare them to your receipts or cancelled checks. Make sure you have recorded all payments.

2. Fill out a W2 form for your babysitter each January, listing the total wages you gave her throughout the tax year. Give her a copy of her W2 before the end of January and send a copy to the IRS. Keep two copies for your records.

3. Obtain Schedule H from the IRS website or by calling the IRS. Complete Schedule H along with your income tax return. Report the total wages you paid your babysitter. If you paid more than $1,700 for the year, you must pay a tax of 15.3 percent on the wages you paid. Calculate the tax on Schedule H and place the total you owe on your 1040 return, line 59. Check box b on Line 59.

4. Attach Schedule H to your 1040 return. Send your 1040 return and Schedule H along with any payment you owe to the IRS before April 15.

References

• Internal Revenue Service: 2009 Instructions for Schedule H