Babysitting is a great way to pick up some extra income – but remember that it is income and must be reported at tax time if you earn more than the annual threshold, which varies from year to year. Babysitting qualifies as a "business" under tax law, so you will have to file a Form 1040 Schedule C, Profit or Loss from Business, or short form Schedule C-EZ when you do your taxes. Depending on how much you earned, you may also have to file Schedule SE and pay self-employment tax on your babysitting income.
Schedule C or C-EZ
Add up your babysitting income. If you're babysitting on a regular basis, you should keep records of when you work and how much you earn for each job, rather than try to remember the details at the end of the year.
Add up your expenses for babysitting. Expenses include any money you spent for your babysitting work: for example, snacks for children paid for out of your own pocket, transportation expenses for picking kids up or dropping them off, supplies for crafts or activities and movie or zoo tickets. Keep a running total of these throughout the year.
Choose either Schedule C or the short form, Schedule C-EZ. If your income from babysitting exceeded your babysitting expenses and you had expenses of less than $5,000, use Schedule C-EZ. Most babysitters can use this form.
Enter your name and Social Security number in the designated spaces and enter the six-digit "Business Activity Code" in box B. For most babysitters, this will be “812990 -- Other personal services."
Enter your total babysitting income on line 1 of Schedule C-EZ.
Enter your total expenses on line 2.
Subtract line 2 from line 1 and enter the result on line 3. Enter the same amount on line 12, Business income (or loss), on Form 1040. Also, enter this amount on line 2 of Schedule SE.
Fill out Part III of Schedule C-EZ only if you are claiming expenses for the use of your car. On line 4, enter the date you first used your personal vehicle for babysitting. On line 5, enter the number of miles you drove your vehicle for both business and personal use. Check the boxes on lines 6 through 8 that apply to you.
Enter your name and Social Security number on Schedule SE.
Fill in line 2 if you haven't already. This will be the result from line 3 of Schedule C-EZ. Assuming you don't also have farm income, write this same number on line 3 of Schedule SE.
Multiply line 3 by 0.9235. If the result is less than $400, stop – you don't have to file Schedule SE because you don't owe any self-employment taxes. Otherwise, enter the result on line 4.
Multiply line 4 by 0.153 to determine your self-employment tax. Enter this amount on line 5. Also enter it on page 2 of your Form 1040 under "Self-employment tax" in the "Other Taxes" section.
Multiply line 5 by 0.50. This is your self-employment tax deduction. Enter the result on line 6 and on page 1 of your Form 1040 under "One-half of self-employment tax" in the "Adjusted Gross Income" section.
Attach Schedule C-EZ and Schedule SE to your Form 1040.
Use a spreadsheet to track your babysitting income and expenses throughout the year. This will save you a lot of work when at tax time.