Reporting Income and Taxes

[SnoopyCool]

This is in reference for the 2008 tax return. I just started babysitting this year, and I don't know how to report this as income. It is, at most, $125 a week, so do I have to fill something out or just put it on our return as income not reported, or is there something else I have to do?

[sweeps]

Yes, it is reportable. Schedule C (or C-EZ) and Schedule SE is where you report it. You should keep records of how much you earned on what dates in the unlikely event you get audited.

[jIM_Ohio]

Did you get paid in cash or by check?
Did you incur expenses from getting this income?
Do you itemize your taxes?

If all transactions are cash, I would not suggest not reporting it, but I also would not suggest reporting it either.

If transactions are by check, treat similar to cash.

If you incurred expenses (travel, home office, phone calls to set up) you can write those expenses off if you itemize and if you report the income.

I am not a tax accountant and the above should not be interpreted as tax advice.

[disneysteve]

If all transactions are cash, I would not suggest not reporting it, but I also would not suggest reporting it either.

I love that carefully worded advice, Jim.

While I would generally concur, I would point out one factor that could make reporting it well worth it. When you legitimize that income, you become eligible to participate in an IRA account.

$125/week is over $6,000/year, beyond the max IRA contribution. If you can afford to put this money, or even part of this money, in an IRA, it would be a great opportunity to get an early start on retirement savings and give that money a long, long time to compound and grow (assuming OP is relatively young).

[sweeps]

OP, please report your income and pay the taxes, if any. To the IRS, babysitting is a business just like any other occupation. Whether you were paid by cash, check or chicken feed is completely irrelevant.

[disneysteve]

OP, please report your income and pay the taxes, if any. To the IRS, babysitting is a business just like any other occupation. Whether you were paid by cash, check or chicken feed is completely irrelevant.

sweeps is correct, of course. Income is income, regardless of the source or the method of payment. If you get caught not reporting income, you get in big trouble. Do people do it and fail to report "under the table" income? Of course. It happens all the time. But it isn't legal.

[jIM_Ohio]

If you claim the payments, it's possible you will owe SS on the payments (7%) plus applicable taxes (10% or 15% federal, maybe more for state). The next thing you will look to do is probably ask for a raise. Probably around a 25% raise to cover the taxes.

If you claim the payments, make sure the person paying you knows it, as they might be able to deduct the payment to you as child care on their taxes too.

If this gets too dicey, consider consulting an accountant which could help you analyze.

I know soccer referees which do not claim the income they make (well north of $125 for a week) as cash. I also know some which claim it, but then also claim business expenses (travel, per diem, home office) to offset the income.

If you claim the income, you should also look to claim the expenses.

[jIM_Ohio]

I love that carefully worded advice, Jim.

I laughed as soon as I read it. Thank You.

[maat55]

It's hard to be a good american and pay your taxes when you have no respect for the government who waste a good portion of it. I can't pick a side here.

[moneybags]

If you claim the payments, make sure the person paying you knows it, as they might be able to deduct the payment to you as child care on their taxes too.

On the otherside, if the payer is claiming the expense on their return, you better be claiming the income.


Also, take into account social security taxes. The payer should be filing appropriate forms, paying their portion of SS tax, and withholding & submitting your portion. If this is not done, you are responsible for the entire amount. You also don't get credit for SS if this isn't done (for what that's worth).

[aida2003]

Yeah, I'm sure millions (or is it in billions?) of dollars go unreported each year. I think one of the reasons why people do that is because all reporting variables get too complicated and hairy. Do I file with the IRS only? Do I tell the other party? What about SS and Medicare? What about State? and on and on. It seems you can get in trouble faster by reporting such little income.
Well, my babysitting went unreported . Should I feel embarrassed? I'm not sure because I don't feel . The gov't is wasting my taxes now and back then I didn't waste my cash. It went all towards my school and my own support.
Then think how many small businesses avoid reporting their income: carpenters, carpet cleaners, mechanics/body shops, offshore accounts, what about prostitutes and drug dealers. For the latter two, businesses in themselves are illegal in the US, I think, so no need to report. Taxes of such income would help the current deficit. Babysitters are just tiny fish in the ocean.

Oh, BTW, I don't promote tax evasion, though it probably sounds that way. I agree, that's illegal.

[SnoopyCool]

Oh, I definitely plan to report it. I just didn't know how. So thanks for your replies.

Steve, I wish I were young! I'm 32. I just picked-up this gig as I am a SAHM and I enjoy it. It gives my 2 year old a playmate. I will only babysit during the school year as this child's mom is a teacher and won't work over the summer.

[disneysteve]

Steve, I wish I were young! I'm 32. I just picked-up this gig as I am a SAHM and I enjoy it.

Were you already funding a spousal IRA? If not, you can use this money to open an IRA. Even $125/week just during the school year will be just about enough to fully fund the $5,000 for the year.

[scfr]

If you net over $400, you'll be reporting it on Schedule C and may be paying Self-employment taxes (so you may want to set a bit aside for that and consider paying quarterly estimated taxes). Be sure to keep track of babysitting-related expeses that might be deductible. For example, if you take an infant CPR class because of your work, I would think the cost of the class would be deductible. I'm not sure if mileage to babysitting jobs is deductible or not, but you may want to read up on that at IRS.gov.

[Aleta]

I don't think that she can deduct the mileage from her house to the babysitter's because she is considered an independent contractor. Although, if she has to do errands for the job as in picking up medication or taking the baby to a necessary place, - she can deduct that. It would be the mileage which I believe is at .505.