Taxes for Temps
By Stephanie Breedlove
Nannies who work for families on a temporary basis are subject to special provisions in the law – known as “the Casual Babysitting Exemption.” The law says families who hire temporary nannies are not required to pay employer taxes or deal with all the employer reporting obligations.
For the casual babysitting exemption, a family is deemed to employ a temporary nanny if the nanny ispaid less than $1,800 in a calendar year.
If a family pays you more than $1,800 in the calendar year, all the normal obligations kick in for the family – going back to the first dollar of pay. In that case, they should withhold taxes from your pay, pay retirement and unemployment taxes on your behalf, and provide you with a Form W-2 at the end of the year so you can prepare your income tax returns.
If, on the other hand, a family pays you less than $1,800, they probably won’t withhold any taxes from your pay nor will they give you a Form W-2 at the end of the year. However, you are still required to report your earned wages on your income tax return. (Remember that the family may be itemizing the wages paid to you in order to receive childcare tax breaks so the IRS has record of your earnings and you can get in big trouble if you fail to report your earned wages). So that you’re not hit with a big income tax bill at year end, you can make estimated tax payments throughout the year to your state and the IRS. If you don’t make estimated payments, make sure you put money away for taxes into a savings account. For an estimate of your tax liability, feel free to use our free Nanny Tax Calculator (focus on the state and federal income tax totals because you will not have to pay Social Security and Medicare taxes as a “casual babysitter”).
If you don’t have a Form W-2 from those temp families, how are you supposed to report your wages?
The IRS gives you two options. One option is to write in the total amount of all your temp wages on Line 7 of Form 1040. You would total up all the wages from all your temp jobs (that have not been reported on a Form W-2) and then write the letters “HSH” next to the total (i.e. “$17,434 HSH”).
This code tells the IRS that you’re a household employee, which is important because it explains why you don’t have Form W-2s on that income.
The other option is to utilize Form 4852, which is the substitute for Form W-2. You can fill it out for eachtemp job and then include those forms along with any W-2s.
For more information about tax and labor laws for nannies,visit us online at www.myBreedlove.com or give us a call at 888-273-3356. We’re here to help.