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Tax tips for babysitters and other part-time caregivers

If you're an after-school nanny, weekend caregiver, date night sitter or other type of part-time caregiver, learn about your tax responsibilities

Some caregivers make a great living working for many families instead of just one. Maybe word in your neighborhood is that you’re a reliable date night sitter and you work for two or three families every weekend. Or maybe you juggle two part-time nanny jobs — one in the morning and the other in the afternoon. Maybe you have a niche for connecting with older people and assisting with household chores and errands around their home. While being hired for so many jobs is great, it can be confusing trying to figure out what your tax responsibilities are.

“Just because you aren’t a full-time employee with one family doesn’t mean you don’t have to pay taxes,” says Tom Breedlove, Sr. Director of Care.com HomePay. “The IRS says if you earn $2,300 or more from any family in a calendar year, and you don’t own your own business or work for an agency, that family should be withholding taxes from your pay and paying their share of taxes as well.”

If you don’t earn that much from any one family, they don’t have any tax responsibilities toward you. However, you still need to claim the earnings on your personal income tax return as household employment wages. To help make things a little more clear, here are three scenarios that you may find yourself in as a part-time caregiver.

1. You work for several families off and on throughout the year

You might work for 10 families in a given month, but as long as one of those families doesn’t pay you $2,300 or more over the course of the calendar year, you won’t have to worry about having taxes withheld from the amount any of these families pay you. “It’s a good idea to keep track of what you earn from each family so you have a running total of your income for the year,” suggests Breedlove.

At the end of the year, you’ll simply add up the total amount of money earned from all the families you worked for and claim it as household employment income. You’ll see this total amount appear on Line 7 of your personal income tax return if you’re using tax preparation software.

2. You earned $2,500 babysitting for one family this year

Even if it’s only a little bit over the limit, the IRS requires the family to pay taxes on your earnings. And even if they want to pay you under the table, it’s in everyone’s best interest to follow the law.

If the family is ever audited, they could be fined for failing to pay taxes and file tax returns for a household employee. And, as an employee, being paid legally helps you build up an employment history that can be verified — which is important for things like taking out mortgages and car loans — and you will build credit toward Social Security and Medicare benefits for your eventual retirement.

3. Your part-time job turned into a full-time job

Just as your job changes, your tax status will very likely change when your work goes from part-ime to full-time work. If your sporadic job suddenly becomes much more regular, your earnings will increase and you’ll probably reach the $2,300 threshold quickly. You’ll need to talk to your employer about how your taxes will be paid. It might be more of a hassle at first, but will pay off for both of you in the long run.

No matter how your work schedule comes together, it helps to know what tax rules and regulations you need to follow. Monitoring your changing income will help both you and your employer(s).

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* The information contained in this article is general in nature, may not be applicable to your specific circumstances, and is not intended to be a substitute for or relied upon as personalized tax or legal advice.