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My wife and I recently hired a full-time nanny to watch our infant daughter. She works 42.5 hours per week (the nanny, not our daughter). We're discussing what we should do when COVID finally wanes and we feel more comfortable going out for date night.

We could ask our nanny if she'd like to earn a few extra bucks. However, since we're already over 40 hours for the week, we'd have to pay her time and a half. Therefore, it makes economic sense to have some teenager or the like on retainer.

I imagine that we wouldn't have to withhold taxes for an infrequent babysitter the way we do for our full-time nanny. However, what is the exact legal requirement? Is there an annual dollar amount after which we'd have to start withholding?

For context, we live in Virginia, USA.

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A babysitter is a household employee in the IRS's parlance. This means that:

[Y]ou may need to withhold and pay social security and Medicare taxes, pay federal unemployment tax, or both. To find out, read Table 1.

You don't need to withhold federal income tax from your household employee's wages. But if your employee asks you to withhold it, you can.

The thresholds in Table 1 (for 2021) are:

  • If you pay more than $2,300 in a calendar year to any one household employee, you must withhold Social Security & Medicare taxes from that employee's wages, as well as pay the employer's share of these taxes.

  • If you pay more than $1,000 in a quarter to any one household employee, you must pay federal unemployment tax. In addition, you are liable for Virginia state unemployment tax as well.

  • As noted in the above document, you do not have to withhold income taxes from your household employees. You and your employee can agree to a withholding arrangement for income taxes, but it's not required. This doesn't mean that your employee isn't liable for income taxes on these wages, it just means that they're not your concern.

Finally, note than wages paid to anyone who is under the age of 18 at any time in 2021, and whose work for you is not their primary occupation, are exempt from Social Security & Medicare taxes. Such wages are still subject to federal unemployment taxes, though. (And possibly also Virginia unemployment taxes, though I haven't checked.) See the "Wages Not Counted" subsections within the sections on "Social Security and Medicare Taxes" and "Federal Unemployment Taxes" in the above-linked publication.

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    Note that there's an exemption for teenagers.
    – Barmar
    Commented Sep 2, 2021 at 12:55
  • @Barmar: Thanks for the heads-up. It appears from the IRS publication that such wages are not exempt from federal unemployment taxes, but they are exempt from Social Security & Medicare taxes. I have updated the answer accordinagly.
    – Michael Seifert
    Commented Sep 2, 2021 at 13:47
  • The threshold is also per-employee, right? So if you have several different babysitters that you rotate among, you're probably not going to exceed the threshold for any one of them. If you go on a "date" once a week, and pay $50 to the babysitter, that's a total of $2,500/year. Split it among 2 sitters and it will only be $1,250 apiece.
    – Barmar
    Commented Sep 2, 2021 at 14:15
  • @Barmar: Yes, that's correct. Edited to include that information as well.
    – Michael Seifert
    Commented Sep 2, 2021 at 14:26
  • All this essentially suggests that in practice it's rarely necessary for parents to worry about any of this when hiring teenage babysitters on an occasional basis. Tax issues are more likely if you have a regular nanny.
    – Barmar
    Commented Sep 2, 2021 at 14:32
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$2,300 a year or $1,000 in a quarter

Source: https://www.poppinspayroll.com/resources/virginia

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