4 things Caregivers need to know about taxes

When you work for a family on a short-term basis, you still need to keep track of your payroll

Updated 2019-05-30

Sometimes families only need care for their kids or aging loved ones for a short period of time. If you have a flexible schedule and are able to work for a few weeks at a time, these temporary jobs can be a good source of employment and income. But as with any other job you’ve had in the past, you still need to keep track of what you’re earning because it’s likely that the family will need to make taxes part of your employment arrangement.

Whether you’ve  been hired for your first temp caregiving job or have been stringing together short-term jobs for years, here are four things you need to know to keep your finances in order:

1. Temporary caregivers are still employees, not independent contractors

When you’re working in a family’s home following the schedule they set and the rules they’ve outlined, the IRS says you’re their employee. This classification is determined by the nature of the work performed, not by how much you are paid or the amount of time you work for the family. You may have heard or read online that you can get a 1099 from the family and report your earnings as an independent contractor, but that’s actually illegal. Instead, the family should give you a W-2 after the end of the calendar year to use for your personal income tax return.

2. Your employer may not need to withhold taxes from your wages

Household employment tax requirements are determined by the amount of gross (before taxes) wages paid to an employee. As a temporary caregiver, if you earn less than $2,100 in a calendar year from a family, the family is not required to withhold any taxes from your pay. This is because in 1995, the IRS modified household employment tax requirements to exempt low wage earners from the tax process. This is sometimes referred to as the “casual babysitting exemption.”

3. If you earn $2,100 or more from a family, taxes will need to be withheld

If family pays you $2,100 or more in a calendar year, they must follow household employment tax withholding and reporting obligations. Briefly this means Social Security, Medicare and income taxes will need to be withheld from your pay and the family will pay some employment taxes of their own. These taxes provide you with several short and long-term benefits, such as credit toward your eventual retirement income and the ability to collect unemployment when your job ends.

If the family fails to withhold taxes and file employment tax returns, they’re in violation of IRS Publication 926 and you won’t be entitled to the benefits mentioned previously. Hopefully, you won’t face that situation, but if you do, the best thing to do is to report your wages and pay your income taxes at the end of the year.

4. You are responsible for keeping track of your wages

If you are paid less than the $2,100 threshold per family you work for, you will most likely not have any taxes withheld from your pay, since your employers are not obligated to do so. However, you are still required to track the amount of money earned from every employer, no matter how little you are paid. This is because the IRS requires you to report all the wages you earn throughout the year by filing a personal income tax return, even if your wages are not high enough to trigger a tax payment. To do this, just add up all the money you’ve earned during the year and record the total on the “Other Income” line of your tax return.

Next Steps: