Did you pay any one babysitter more than $1,700 in 2009? If you did, she’s considered your employee–and those “nanny taxes” of Zoe Baird fame apply to you. It’s an incredibly low threshold–100 hours at $17 an hour or 170 hours at $10, or about 20 or 30 evenings work, and it applied to us this year. So we set out to pay our babysitter legally. Better for her–she’ll earn credit towards social security and have reportable income if she needs to get a loan. Better for us because it’s just better to follow the rules.
It turned out to be a lot harder than you’d think.We have two babysitters. One takes care of the kids at her house. That means she’s her own employer, and she reported her own income. That was easy for us (less so for her; she had to hire a tax service to help her cope with the various deductions and exemptions). The other comes to our house. She’s undeniably our “employee,” according to the “Household Employer’s Tax Guide,” but designating her as such started us on an odyssey that’s yet to end. Mona Simpson, writing in last week’s New York Times, opined that all employers should pay nannies on the books, and I wholeheartedly agree. But what she missed–and many people do–was that the law doesn’t just apply to “nannies,” a term people tend to use for someone who comes in daily and does the bulk of the child care–but to many casual babysitters. $1,700 is a pretty low threshold, and covers plenty of people, like me, who want to do the right thing but don’t typically use a tax preparer. But the process of getting yourself set up to pay taxes for your sitter isn’t easy, especially if you’re trying to do it retroactively.
We didn’t realize we’d hit the threshold until the tax year was over, so we didn’t withhold. As it turns out, we should have been sending in quarterly payments to the IRS on our sitter’s behalf, which sounds like something that’s going to require me to pay my sitter even more to deal with it this year. We needed an Employer Identification Number, and that, too, has to be obtained before the transactions begin–in our case, back in 2008. Without a way-back machine, we’ve yet to figure out how to do that. We’re still trying to work out how to have our sitter report herself as working for us and make the payments we need to make for her withholding. We’ll get it right, we’re committed to the process. But I can see why most people don’t do this. If the government wants respect and reported wages for “domestic workers,” then state laws like the one pending in New York aren’t going to help. It’s going to take tax change at the federal level to make this a workable process nation-wide.