According to US government regulations for 2007, babysitting income is still considered income and should be reported on your tax return. If you are paying a babysitter as an employee, you must report their wages as well. Many people choose not to report this expense at all, which may never cause you a problem, but in the event of an audit, or in order to prevent an audit, it is always better to prevent trouble. As documented in Publication 529 of the IRS, in the section on Employee Compensation and Related Income, child caregivers who are US citizens must report this income.
If you are about to employ a babysitter and want all paperwork in order for tax purposes, be sure to give your employee a W-2 form to fill out and submit. Then, in January of the following year, like any other employee, they will receive a W-4. If you are not paying them extra to cover their taxes, keep notes of this in your records and ensure that your sitter knows that the wages you are paying them include what the government will take out for taxes. If you have additional questions, call the IRS for clarification at 1-800-829-1040.
