I paid a babysitter...

[Taxesarewild997]

So I paid a babysitter to babysit in my own home... My question is the person who babysat was under 18, until November 2023 and they are considered a dependent under their adopted parents taxes. I don't want to mess anyones taxes up but how do I claim that they babysat for me, without this being an issue? I am just at a loss because I keep seeing different cutoffs for what they have to claim. Like does their parents put that the child received let's say $5000 total or not? 

[Vanessa A]

If you paid someone $5,000 to babysit your children you would need to issue them a W-2 and include Schedule H with your return, if this is their principal occupation, then they are a household employee regardless of how old they are.  Also, if you paid them over $2,600 you should have been withholding and paying social security and Medicare taxes on this person.

If this is not their principal occupation, since they are under 18, (Ex. they are a student), then you would not need to issue a W2, pay employee withholding taxes or file the Schedule H.  Since they are 18 now, if you pay them more than $2,700 to babysit this year, you will need to pay household employee taxes, issue a W-2 to them and file a Schedule H. 

Either way, they would need to report the income on their own return. Their parents cannot claim the income on their return.  

Also, if you are trying to claim the child and dependent care credit, you will still need to add their name, address and social security number to form 2441 to claim the credit. 

@Taxesarewild997  (Edited 2/8/24 @ 10:10AM PST)

[Opus 17]

If the babysitter is NOT your child or your dependent, then the rule is that you are not required to file or pay household employer tax if the employee is under age 18, provided that providing household services is not their primary occupation (such as, they are a student and babysit on the side).  If  household services is their primary occupation, you must withhold and pay HHE taxes.

Even assuming the babysitter is a student, then from this person's birthday to the end of the year, you would be subject to the rules for withholding and paying HHE taxes.   But because you don't count wages paid while they were under 18, you would only need to actually pay HHE tax on your tax return and issue a W-2 if the amount you paid after they turned 18 and before 12/31/23 was more than $2700.  See table 1 of publication 926.

https://www.irs.gov/publications/p926#en_US_2024_publink100086740

(However, you will need to pay HHE tax, and issue a W-2, if they still babysit for you in 2024, if you pay more than $2700 over the year.)

Assuming the amount paid during that time was less than $2700, you don't issue a W-2 or pay HHE tax on your tax return.  But, to claim the credit, you must put their name and SSN on your tax return on form 2441.  The IRS will be looking for matching income on the babysitter's return.

The babysitter will report the wages on line 1b of form 1040, "household employee wages not on a W-2."  In most cases, a child who earns a little money does not jeopardize their status as their parents' dependent.  Whether or not the babysitter must file a tax return depends on their total financial situation, any other income they have, and whether any of that income is considered "unearned" (which could be scholarships, prizes, gambling income, hobby income, or interest and dividends from investments).  It's not really any of your business.