Actually you need to enter baby sitting income as self-employed income that is subject to the self-employed tax. This is substantiated in the following Turbo Tax post written by Carl. Once done however, you are eligible for the earned income credit as well as a Roth Contribution. To report the income, go to:
- Go to federal>income and expenses>
- Self-Employment>Self-employment income and expenses
- Complete the profile that asks about your business
- Then there will be a screen where you will enter your self-employment income.
At this point, you may wish to make a decision to deduct expenses against your self-employment income. This would lessen your self-employment tax but would lower your saver's credit, the amount that you can contribute to a Roth, and the EITC credit because there is less income to count toward the credits. Your SE tax would be approximately $425 based on $3000 worth of income. Obviously, your SE tax would be less with less income that is reduced by expenses but the downside is that there is less income for the credits and Roth contribution. You can work it both ways to see how this would benefit you.
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