It is not very uncommon that many parents hire someone, in order to take care of their kids for a couple of hours or date nights after school. However, many parents or families do not know that when they hire someone, they develop an employer - employee relationship with them, as they are paying to that person for his or her services.
This employer and employee relationship in turn has some probable tax implications, as per the schedule of babysitting. Therefore, well-known tax preparers in New Bern NC say that all families who hire a babysitter, nanny, or any other type of household employee, must know about the tax rules that apply to them.
According to the Internal Revenue Service, better known as the IRS, any type of household employee, including babysitters, nannies, senior caregivers, etc, who earn $1,800 or above in one calendar year should withheld their taxes, similar to the employee who works in a corporate office. Moreover, the employer (that is you) and the caregiver must pay their portion of employer tax returns.
However, it may seem to you that $1,800 is a huge sum and you surely believe that you do not pay this much to your nanny, babysitter, or senior caregiver. But, Asharp Bookkeeper in New Bern NC says that in reality, this is not the case. The wage threshold of $1800 does not take a long time to cross. For instance, let us suppose that you give your household employee a salary of $10 for every hour. Then, contemplate the following situations:
1. The after-school babysitter: Consider if you hire a babysitter, in order to watch over your small kids for 3 hours, from Monday to Friday, for the time when you are not at home and your kids get free from school, till you come back to your home from your workplace. For this, your babysitter will earn $150 for each week. However, just after 12 weeks, you will cross the $1,800 yardstick.
2. The date night babysitter: This type of babysitter takes care of your children for around 5 hours per month, so that you and your spouse can enjoy a date night. In this situation, your babysitter will make only $600. Therefore, you do not have any tax responsibilities. This is called the “casual babysitting exemption” by the IRS, since it believes that there is no reason to put the responsibility of tax rules on families for such a sporadic work schedule. However, Asharp Bookkeeper tax preparers also inform that if you go for a date-night once in a week, then at the end of the year, the salary of your babysitter will jump to $2,400, and so the tax rules will apply to your family in such a scenario.
Many families do not realize that some of the tax rules also apply to them. When the tax season is around the corner, then they choose to treat their babysitter as an independent contractor and give him or her Form 1099. Or, they simply just opt to keep her “off the books,” since they have paid her salary in cash round the year.
Nevertheless, tax preparers in New Bern NC say that both these methods are costly tax mistakes and are incorrect too. This is why it is so much important for you to understand the fundamentals of household employment taxes, so that you can qualify for tax breaks and be free of risk, in order to balance your employer expenses.
How can your babysitter become an employee?
An employer and employee relationship develops when someone is in control of the person and pays some amount of money for his or her services. Therefore, it is about who takes control of the working relationship. Tax preparers in New Bern NC, namely Asharp Bookkeeper, tell taxpayers that babysitters or nannies are always your employees and not your independent contractors, as you are the one who controls their schedules, decides what activities are fit for your kids, selects for how long your babysitter will work, etc.
And, if you provide your babysitter with Form 1099 during a tax year, then you are misrepresenting your employee. According to the IRS, this is a type of tax evasion, and thus it can cost you huge fines, if you get caught in a wage dispute filed by your babysitter or an audit conducted by the IRS. Instead of this, you must provide Form W-2 to your babysitter, so that she or he can file their personal income tax returns.
For this, you can take help from qualified tax preparers, like Asharp Bookkeeper, so that they can help you out in navigating babysitter taxes. They can also simplify and help you better understand the whole babysitter tax process and rules, with their expert advice and professional services. Moreover, they will inform you about your responsibilities as employers of household workers and caregivers, so that you can file your babysitter taxes easily and quickly, without any hassle and additional expenses.
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