What are the tax consequences for parents and workers hired to help with remote learning or childcare?

Because of the pandemic, many brick and mortar schools have shifted to remote instruction. However, for a variety of reasons, remote learning may not be a suitable option for every family. To address the particular needs and circumstances of each family, such as health concerns, some have turned to homeschooling pods (small groups of children sharing a learning space led by a pod instructor) or have hired nannies to care for younger children. Parents hiring pod instructors, nannies, and similar household workers may be unfamiliar with tax filing and withholding requirements. As a result, they may find themselves with unexpected tax liabilities or penalties. It is important to understand the tax consequences of hiring a household worker, including whether a worker is treated as an “employee” or an “independent contractor” for both federal and state reporting.

Employee or independent contractor?

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