Put off your nanny taxes until now? Just realized you may have had a household employee last year? It’s not too late to get caught up with your nanny tax obligation and get things squared away with the IRS and your state tax agency.
Here’s how.
Who’s Considered A Household Employee?
Household employees include nannies, senior caregivers, private educators and tutors, and caregivers in a nanny share. Seasonal or temporary employees – like a summer or after-school nanny – can also be considered household workers. As long as that employee made at least $2,700 in 2024 (or $2,800 in 2025), you will have a nanny tax obligation (Social Security, Medicare, and potentially other responsibilities).
Or if an employee made $1,000 in a calendar quarter you will owe federal – and possibly state – unemployment taxes.
Get Your Tax ID Numbers
If you haven’t done so already, step one is to get your tax identification numbers. For the IRS, you can get your federal employer identification number (FEIN) online. Check your state government website to find out how to get your state tax id.
Figure Out How Much You Paid Your Nanny By Week
If you’ve kept good payroll records, this shouldn’t be too much trouble. Make sure your nanny is being paid at least the highest prevailing minimum wage of the federal, state, and local rates. They should also be paid an overtime rate of time and a half for any hours worked over 40 in a workweek. Live-in nannies may not need to be paid overtime although rules vary by state.
Calculate Your Tax Obligation
A household employer has two main tax responsibilities – FICA (Social Security and Medicare) and unemployment. You’ll owe 7.65% of your nanny’s gross wages in FICA taxes, which will need to be paid when you file your personal tax return. Federal unemployment (FUTA) is 6% on the first $7,000 of your nanny’s wages. State unemployment (SUI) taxes vary but are typically several hundred dollars. If you pay state unemployment taxes, you may be able to reduce your FUTA obligation to 0.6%.
Your nanny will also owe the same amount in FICA taxes, which will also be due when they file their tax return. Unemployment taxes, however, are an employer-only responsibility.
Complete Year-End Tax Forms
Your nanny will need their Form W-2 by January 31 and you’ll file a copy of the W-2 and Form W-3 with the Social Security Administration by the same date. As a reminder, nannies and other household workers are considered employees by the IRS and not independent contractors. Don’t give your nanny a 1099. That could be considered tax evasion since you’re shifting your employer tax obligation to your nanny.
File Schedule H With Your Personal Tax Return
Attach Schedule H to your personal tax return when you file. This is where you report the household employment taxes due to the IRS. If you haven’t been paying your nanny taxes throughout the year, you will owe this entire amount when you file your return. You could wind up owing too much in taxes and be hit with an underpayment penalty.
Going forward, remit your household employment taxes – including what you withhold from your employee’s pay – quarterly using Form 1040-ES. Another option is to increase withholdings from your own pay to cover nanny taxes at the end of the year.
Take the Child and Dependent Care Tax Credit
Paying your nanny legally means you can take advantage of the Child and Dependent Care Tax Credit, which can save you $600 (one child) or $1,200 (two or more children).
Tax Tips and Resolutions For 2025
It’s much easier to handle nanny taxes each pay period rather than wait until to end of the year and catch up. Putting in the time and effort now to get things right is far better than ignoring your obligations any longer. Getting caught out of compliance is easy and costly. All it takes is for your nanny – who you split with amicably – to file for unemployment. Or they get hurt on the job and will miss work but you don’t have required workers’ compensation coverage. Or your nanny realizes you weren’t paying them overtime or minimum wage and they file a claim with your state’s labor agency. You get the idea. Do it right and enjoy the peace of mind – and tax savings!
Resolutions For Next Year
- Withhold FICA and income taxes from your nanny’s pay each pay period
- Remit your FICA and FUTA taxes as well as your nanny’s FICA and income taxes quarterly with Form 1040-ES. Most states allow you to pay SUI quarterly as well.
- Sign up for your employer’s Dependent Care FSA and enjoy even more tax savings. Your nanny’s wages are considered a reimbursable expense.
Better yet, let our partner GTM Payroll Services handle nanny taxes and payroll for you. Get a complimentary, no-obligation consultation with a household employment expert just by calling (800) 929-9213. When you’re ready to sign up, mention Sittercity and they’ll waive the $75 set-up fee.
