Many nannies work for one family exclusively throughout the year, but as we approach the holiday season, those nannies may find themselves working temporary jobs on the side. This could be due to their primary employer going on vacation for a week or two or perhaps another family has short-term childcare needs that happen to work with the nanny’s schedule. When these situations arise, some nannies wonder what tax rules are applicable for their temporary work.
The IRS says families who hire temporary nannies are not required to pay employer taxes or deal with all the employer reporting obligations as long as the nanny does not earn more than $1,800. This is known as “the Casual Babysitting Exemption.” But if a family pays a nanny $1,800 or more during her temporary employment, all the normal tax withholding and reporting obligations kick in for the family – starting with the first dollar she earns. The family will also need to provide the nanny with a W-2 so she can properly file her personal income tax return.
If the nanny does not earn more than $1,800, she will most likely not receive a W-2 from the family as they are not required to provide one to her. So in order to legally report her income, she will need to report her total wages for all temporary jobs she held for the year, enter the amount on Line 7 of Form 1040 (personal income tax return) and write the letters “HSH” next to the total (i.e. “1,734 HSH). This code notifies the IRS that the nanny is a household employee, which is important because it explains why she does not have a W-2 for this income.
Please be aware that any income from temporary jobs will still be subject to federal and state income taxes (if applicable in your state). This means the nanny may not receive a tax refund in the amount she is expecting after the IRS deducts these taxes. 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”). For additional details about working as a temporary employee, visit the Answers section at www.breedlove.com.