Do I Need to Give My Babysitter a 1099 or W-2?

For almost every family, the answer is neither a 1099 nor, in many cases, a W-2. Whether you need to give your babysitter a 1099 or W-2 comes down to two things: 1099-NEC forms only cover payments made in the course of a trade or business, and paying someone to watch your kids is a personal expense, so a 1099 is off the table.¹ A W-2 comes into play only once you’ve paid a single babysitter $3,000 or more in cash wages during the 2026 tax year, which is the threshold that turns you into a household employer with real tax obligations.²

Why a 1099 Almost Never Fits a Babysitter

The 1099-NEC exists to report $600 or more paid to independent contractors in the course of a business. The instructions state it plainly: “Personal payments are not reportable.”¹ Hiring a sitter so you can go to work or dinner is a personal payment. You’re not running a business, so you don’t file a 1099 even if the amount would otherwise qualify.

The narrow exception is a home-based business that hires a caregiver as part of its operations, or payments to an incorporated daycare or staffing agency for services rendered to that business. For a typical family, none of that applies.

Why the IRS Treats Your Babysitter as a Household Employee

Skipping the 1099 doesn’t mean skipping taxes. The IRS looks at who controls the work: behavioral control, financial control, and the nature of the relationship.³ If you set the hours, choose the location (your home), provide the food and supplies, and direct the care, that’s an employer-employee relationship. It doesn’t matter whether the sitter comes twice a week or five days a week. A regular after-school sitter, a weekend babysitter, and a full-time nanny all fall on the same side of the line.

If a staffing agency controls the worker’s assignments, training, and methods, the agency may be the employer instead of you.⁴ But if you found someone through an agency and then directed their work yourself, you’re still the employer.

The $3,000 Wage Threshold for 2026

Employee classification alone doesn’t trigger a W-2. Tax obligations kick in once you pay $3,000 or more in cash wages to a single household employee during the 2026 tax year.² Cross that line and all cash wages you paid that person during the year become subject to Social Security and Medicare taxes, not just the amount above $3,000.⁵

A separate trigger applies to federal unemployment tax (FUTA): $1,000 or more in total cash wages to all household employees combined in any calendar quarter makes you liable for FUTA that year.⁶ The FUTA test looks across all your household workers together; the $3,000 FICA test is per employee.

Cash wages include payments by check, direct deposit, and payment apps. Meals, a room, and other non-cash benefits don’t count toward either threshold.

If you never cross the $3,000 line with any single sitter and never hit $1,000 in a quarter across all of them, you don’t owe employment taxes, don’t file a W-2, and don’t file a 1099. You just pay the sitter.

What You Owe and File Once You Cross the Line

Above $3,000, you and your employee each owe 7.65% in FICA taxes: 6.2% Social Security on wages up to $184,500 in 2026, plus 1.45% Medicare with no cap.⁷ You withhold the employee’s 7.65% share from each paycheck and match it yourself, for a combined 15.3%. If you cover the employee’s share out of your own pocket, the IRS treats that extra payment as taxable income to the employee.

Federal income tax withholding is optional. You aren’t required to withhold it, but if your employee asks and you agree, get a completed Form W-4 from them.⁸

FUTA is 6.0% on the first $7,000 of wages per employee. A state unemployment tax credit typically drops the effective federal rate to 0.6%, capping FUTA at $42 per employee per year.⁶ FUTA is entirely on the employer; nothing comes out of the employee’s pay.

Get an EIN

You need an Employer Identification Number before you file anything. Apply online at IRS.gov/EIN or submit Form SS-4 by fax or mail.² The nine-digit number goes on every form you file for the employee.

Give the Employee a W-2 by February 1, 2027

For the 2026 tax year, you must give your employee a Form W-2 by February 1, 2027 showing total wages and all amounts withheld for Social Security, Medicare, and any federal income tax. File Form W-3 to transmit a copy to the Social Security Administration. Even with just one household employee, you file the W-3.⁹

Report the Taxes on Schedule H

You report and pay household employment taxes on Schedule H, attached to your personal Form 1040.¹⁰ Schedule H totals your FICA liability (your match plus what you withheld) and your FUTA liability, and that total flows onto your return.

Watch the timing. Because you don’t make quarterly payroll deposits the way a business does, the full bill lands on your 1040 at filing time. To avoid an underpayment penalty, increase your own income tax withholding at your job or make quarterly estimated payments using Form 1040-ES.⁸

Exemptions That Can Skip the Employment Taxes

Several exemptions relieve you of FICA or FUTA even when the worker is a household employee. The one that matters most to babysitting families is the under-18 rule: wages paid to any household employee under age 18 at any point in the year are exempt from Social Security and Medicare taxes, as long as household work isn’t the employee’s principal occupation. A high school or college student who sits on weeknights fits cleanly.²

Wages paid to certain family members get special treatment:²

Your spouse: exempt from FICA and FUTA.
Your child under 21: exempt from FUTA.
Your parent: exempt from FUTA in all cases, and exempt from FICA in most situations. An exception applies if your parent cares for your child who is under 18 (or has a condition requiring personal care) and you are divorced, widowed, or living with a spouse unable to provide that care.

J-1 visa holders, including au pairs, are not subject to Social Security and Medicare taxes so long as they remain nonresident aliens and their work is authorized under the visa.¹¹ The exemption ends if they become U.S. tax residents or switch visa types.

An exemption removes the employment tax, not the income tax. The employee still owes federal and state income tax on the wages.

What Happens If You Ignore This

The most common mistake is paying a nanny in cash and filing nothing. The IRS can assess the unpaid employment taxes plus a failure-to-pay penalty of 0.5% per month on the outstanding balance, up to 25%.¹² Interest accrues on top. Skip the W-2 and separate penalties apply to each form filed late, starting at $60 per form within 30 days of the deadline and climbing to $330 per form after August 1.

Calling a household employee a contractor to avoid the paperwork creates a second layer of trouble. Beyond the back taxes and penalties, the worker may have been denied protections under the Fair Labor Standards Act, including minimum wage and overtime.¹³ The IRS and Department of Labor both take an interest, and neither is sympathetic to “I didn’t know.”

Other Rules for Household Employers

Once you’re an employer, a few other requirements ride along with the tax forms.

Form I-9: federal law requires you to verify your employee is authorized to work in the United States, with the form completed within three business days of the start date. A narrow exception exists for truly sporadic, irregular domestic work, but a regular babysitter or nanny doesn’t qualify.¹⁴

Overtime: household employees covered by the FLSA must receive one and a half times their regular rate for hours over 40 in a workweek.¹⁵ Most relevant for full-time nannies, but it applies to anyone crossing 40 hours.

Recordkeeping: keep employment tax records for at least four years after the due date of the return on which you reported the taxes, or the date you paid them, whichever comes later.²

State taxes: most states require state unemployment insurance from household employers, and roughly a third also impose disability insurance or paid family leave contributions. Rates and thresholds vary. Check with your state’s labor or revenue department.

Workers’ compensation: rules depend on your state. Some mandate coverage once a household employee works a certain number of hours per week; others exempt domestic workers. Homeowner’s insurance generally does not cover a household employee’s workplace injuries, so confirm what your policy actually does before assuming you’re covered.

1
Internal Revenue Service. Instructions for Forms 1099-MISC and 1099-NEC (04/2025)
2
Internal Revenue Service. Publication 926 (2026), Household Employer’s Tax Guide
3
Internal Revenue Service. Form 1099-NEC and Independent Contractors
4
Internal Revenue Service. Hiring Household Employees
5
Social Security Administration. Employment Coverage Thresholds
6
Department of Labor – Office of Unemployment Insurance. Unemployment Insurance Tax Fact Sheet
7
Social Security Administration. Contribution and Benefit Base
8
Internal Revenue Service. Topic No. 756, Employment Taxes for Household Employees
9
Internal Revenue Service. General Instructions for Forms W-2 and W-3 (2026)
10
Internal Revenue Service. About Schedule H (Form 1040), Household Employment Taxes
11
Internal Revenue Service. Taxation of Alien Individuals by Immigration Status – J-1
12
Internal Revenue Service. Failure to Pay Penalty
13
U.S. Department of Labor. Misclassification of Employees as Independent Contractors Under the Fair Labor Standards Act
14
U.S. Citizenship and Immigration Services. Who Must Complete Form I-9
15
U.S. Department of Labor. Fact Sheet 79D – Hours Worked Applicable to Domestic Service Employment Under the FLSA