In 2011, if a family employs a household worker and pays him/her less than $1,700 in the calendar year, the family is not obligated to withhold FICA taxes (Social Security and Medicare) nor are they required to pay the employer portion of FICA for that individual.  It's generally referred to as the "Casual Babysitting Exemption."

In 2012, the threshold will increase to $1,800 in a calendar year.

Please keep in mind that, even though you may be exempt from FICA reporting, you may still be required to file unemployment tax returns if the total paid to all employees combined exceeds $1,000 in a calendar quarter (a few states have thresholds that are even lower).

Finally, whether you have to file or not, you are legally still an employer so make sure you adhere to all local, state and federal labor laws.