We didn’t give a W-2 or a 1099 to our babysitters who work in our home. Are we required to do so?
First, to address nanny and/or babysitter taxes, you need to determine if the babysitter(s) are self-employed or household employees.
If you control how the work is performed, the babysitter is a household employee. If the babysitter controls how the work is performed, the babysitter is self-employed.
Note: In most cases a babysitter/nanny would be an employee. However, in limited situations (e.g., a sitter hired through an agency for a short-term) there could be an argument for independent contractor status.
Self-employed workers usually provide their own tools. They offer their services to the general public in an independent business.
If a babysitter or nanny is self-employed, you don’t have reporting or withholding. The babysitters still must report their income to the IRS. However, you don’t need to issue a Form 1099-MISC to the babysitter. This is because you aren’t paying the babysitter in the course of your trade or business. Payments to babysitters are usually personal in nature.
If the babysitter is your employee, you must provide a Form W-2 if one of these is true:
- You paid the employee at least $2,100 in 2018.
- You paid the employee wages of any amount, and you withheld federal tax.
If you meet one of those rules, you must issue a W2 regardless of the age of the babysitter.
Complete a Form W2 and give copies B, C, and 2 to the employee by Jan. 31, 2019. To file these forms, you’ll need a tax ID. Send the W-2, copy A with the W-3 to the Social Security Administration by the last day of February — or the last day of March if you e-file the W-2.
If you don’t meet these requirements, you’re subject to two separate civil penalties. The penalties can be up to $100. You can reduce the penalty by filing the required forms within 30 days of the deadline.
The IRS created a Taxpayer Bill of Rights to outline 10 fundamental rights taxpayers should have with any IRS encounter. Review what they mean to you.
Learn more about letter 2531, why you received the letter, and how to address it with help from the tax experts at H&R Block.
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