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The babysitter tax is the amount of money that the employer and employee owe their government, usually at the end of every year, based on a percentage of income paid or earned. In many jurisdictions, the percentage is split equally between the babysitter and his or her employer. Those required to pay the tax typically have to earn over a certain amount in any given year, and exemptions may be made based on age or student status. This tax is also commonly referred to as a nanny tax.
Whether a sitter is employed full-time or only on occasion, he or she may be required to pay taxes on income earned from babysitting. Each government utilizes different worksheets or forms to determine the exact amount of taxes owed on salary paid to household employees, including childcare providers. If the law in one’s country requires the payment of babysitter tax, failure to do so could result in fines and potential legal issues.
Most jurisdictions require that the employer and employee split the percentage of taxes owed equally. For instance, if the babysitter tax is 14% of the income earned, then the employer will have to pay 7% of the income to the government and the sitter will pay the other 7%. In some cases, employers will decide to pay the entire percentage; in this instance, the employee is typically required to report an additional 7% of income, in addition to what he or she received throughout the year. Employers can also withhold the percentage of the tax owed by the employee and then pay their portion of the tax, and what they held from the employee, at the end of the year. While the employer can pay the entire percentage out of pocket, it is typically not legal to place the whole tax burden on the babysitter.
The majority of countries that require this tax have a minimum amount that must be earned or paid in order for a person be liable. Anything below the preset amount, which can vary by year, is not taxable. Despite this, once the minimum is met, the entire income is typically taxable. For those who only employ a babysitter occasionally, this usually exempts them from the tax.
The percentage of the income earned that is required for tax payment varies between governments, and often changes slightly from year to year. A babysitter tax payment can be a requirement of both the employer's and employee's country and local governments. In some cases, if the sitter lives in one place and works in another, separate taxes will need to be paid for both locations.
In some areas, if a child care provider is a full-time student, either in high school or college, and under the age of 18, then their income is typically not taxable, as babysitting is not considered his or her primary job. There can also be age limits on who is liable for paying the tax, and, in most cases, if the babysitter is a parent, spouse, or child of the employer, the tax is usually exempt. When a sitter is hired through a babysitting agency, the agency is considered the employee and is therefore responsible for paying the tax.