If you’re considering hiring a nanny to look after your children, you might be questioning how the tax process really works. They’re not an employee since you’re not a company owner, right? Isn’t it true that nannies are self-employed? It’s all very confusing until you dig deep and understand all the necessary details to pay your taxes hassle-free.
What is the 1099 Form?
A 1099 form must be filed with the IRS by any business owner, firm, or employer that obtains outside services from a vendor, contractor, or subcontractor. They must then provide copies of this document to their suppliers and network operators.
Any revenues of $600 or more for services provided by individuals who are not your typical employee are subject to a Form 1099. This includes tenancy agreements, insurance bills, rewards and prizes not provided to workers, monetary payments for products or services, crop insurance revenues, and other services.
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How to decide between 1099 and W2?
If you’re curious whether you should issue a 1099 or W-2 to your child caregiver or nanny, you must first decide whether they are self-employed or family workers.
It’s very simple. The caregiver is an employee if there is someone who maps how a certain task is done. The babysitter is self-employed if she/he has control over how the work is done and there is nobody to direct him/her.
A babysitter or nanny who provides scheduled service in your house is almost always employment. However, if the worker is provided by an organization, which has control about which work is done and how it is done, the person isn’t your staff.
Now comes the real question! 1099 or W2!
W2 – if your nanny is your employee
1099 – if your nanny is self-employed
What happens if you choose the wrong form?
If you categorized your babysitter as an independent contractor and issued them a 1099 form by mistake, you’ll need to send them a W-2 and reimburse them for any fees they filed on your account.
Giving them the improper form and erroneously categorizing them is deemed tax evasion by the IRS. You may also be required to pay extra fines because of your error, so be extra careful while filing the tax.
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1099 for Nannies
Self-employed workers often furnish their gear. They run an independent business and provide services to the general population.
There are no reporting or withholding obligations for a self-employed babysitter or nanny. The IRS still requires the babysitters to declare their earnings. You don’t have to issue a Form 1099, and you don’t have to withhold taxes. Because you are not paying the babysitter as part of your trade or company, this is the case. Payments are an out-of-pocket cost for the individual.
1099-MISC vs. 1099-NEC: What’s the Difference?
The IRS will reintroduce the 1099-NEC form for reporting nonemployee remuneration in 2020. Instead of a Form 1099-MISC, your customers should give you a Form 1099-NEC if you are a freelance worker, were self-employed, or had a passive income. You’ll use the info on that form to complete your tax return, as customary.
There are many subtypes of form 1099; therefore, choosing the right form is essential before tax payment to avoid any unwanted troubles.
How to get 1099 for your Nanny?
It is very simple to get a 1099 form for the nanny. Simply follow the steps below:
- Firstly, open any browser and open the website www.irs.gov
- Click on the search bar on the very top and type in “1099.”
- A lot of search results will appear regarding 1099 forms. In order to get a blank form, click on “Form-1099”.
- Your desired form will pop up.
- Download and fill-up the form step by step. You may get assistance if you want while filling it up
How to fill up the 1099 Form?
You’ll need particular information to fill out a 1099 form before you can submit it. This information is often collected on the form. Simple things like the contractor’s name, business name (if applicable), federal tax categorization, any relevant exclusion designations, location, tax number, or social security number will all be included.
Follow the steps below to effectively fill the nanny tax 1099:
- List your name, address, city, state/zip, and telephone number in the first box on the left-hand side of the form
- Enter your taxpayer identification number below the first box
- Add in the recipient’s details (meaning the person who receives the money) next. This includes TIN, name, and street address
- Now add the details, including city, state/zip of the recipient
- Finally, add in the total earning amount
- Click on the checkbox that says, “Please check the box at the left to review any form errors. Once all errors are resolved, a button will appear below which will allow you to save this form to your computer…”
- Next comes “Click here to save this file to your computer” to save a copy of the form on your computer
- There comes another checkbox to which you will click only if it’s the last form you’re filing today, and you are ready to electronically file.
- You would need to add in additional details like contact name, phone number, email address
How to Submit the 1099 Form?
After adding in all the necessary details, the final step is submitting the form on the website.
- There will be a checkbox at the very last of the form, which will send a copy of the electronically filled form to the recipient. Click if you want to send. You may skip it if you don’t.
- The total cost of your forms will appear on the right-hand side.
- A final box will appear where they will require you to double-check the form for any mistakes that you might have made. Do a thorough check and correct the mistakes, if found any, before submitting. If no mistakes are found, continue by clicking on the checkbox area and pressing ‘ok.’
- Next, you would have to pay for the forms online using your credit cards. You may use Mastercard, PayPal, or Visa card.
- Select the payment method that best suits you and click on the ‘pay now’ button
- Add payment details and proceed to pay
- After that, you need to upload the file on the site by simply clicking on the “I am not robot’ first and then selecting the saved file on your computer.
- You may choose multiple forms for submitting
Did you know?
Do you know your nanny’s age because guess what? You don’t have to worry about filing taxes if your babysitter or nanny is under the age of 18! The only exceptions are if watching your children is their full-time job or if you pay them more than $1,100 each fourth. If they’re a student, babysitting isn’t regarded as their major work; therefore, you can stop reading now and don’t have to worry about taxes at all!
Paying Taxes on Time!
Make sure to always pay the taxes on time. It always gets easier when you do everything on time. The due date of every 1099 form is usually the 31st of January every year. The tax should be filed before the 31st!
Taxpayers are obligated to pay any taxes owing on any income generated during the taxation year, even if a 1099 form has not been issued.
What happens if one fails to pay the Tax on due time?
Late filing of forms 1099-MISC carries a penalty of fifty dollars ($50) per form if filed within thirty days and hundred dollars ($100) per form if filed after thirty days. You can postpone paying the penalty until you receive a notice from the IRS. If you pay the penalty by the due date on the IRS notice, you will not be charged interest.
Conclusion
All the necessary details about the 1099 form for nannies have been provided above. The knowledge regarding form generation, selection, filling, and payments will prove beneficial to any tax filer looking for authenticated information.
All you need to do is use the information provided and pay the tax using the appropriate form type (1099 or W-2 and subtypes) by properly filling out all necessary details. Above all, the nanny tax must be paid within the due time, so you don’t have to give any extra money and to avoid any unpleasant circumstances.