Bringing someone into your home to care for your children is a big deal. Beyond the day-to-day, there’s a layer of responsibility that comes with paying a nanny—the kind most families would rather not think about: taxes and legal employment.
But here’s the truth: doing things the right way isn’t just about following the rules. It’s about protecting your family, your finances, and your peace of mind.
But here’s the truth: doing things the right way isn’t just about following the rules. It’s about protecting your family, your finances, and your peace of mind.
What It Means to Be a Household Employer
Let’s get this out of the way: If you pay a nanny $2,800 or more in 2025, you’re legally a household employer, no matter if it’s part-time, after school, or just during summer. That means you have certain obligations under federal and state law .
What You’re Legally Required to Do
- Get a Federal EIN and State Tax ID
- Report new hires to your state (usually within 20 days)
- Withhold and pay taxes: Social Security, Medicare (FICA), FUTA/SUTA, and possibly income taxes
- Provide a W-2 and file Schedule H with your federal tax return
- Contribute to unemployment insurance so your nanny has a safety net if things change
Trying to skip these steps? It’s not worth it. Misclassifying a nanny as an independent contractor is illegal, even if they’re part-time or paid in cash.
💡 “But I only need help after school.”
It doesn’t matter. If you meet the pay threshold, you’re responsible for nanny taxes. Period.
Risks of Paying Off the Books
- IRS audits, back taxes, and major penalties
- No eligibility for child care tax credits or Dependent Care FSAs
- Zero coverage for unemployment or workers’ comp if something goes wrong
- Reputational damage if a former nanny files for unemployment or reports you
The Upside of Legal Pay
- Claim tax breaks like the Child and Dependent Care Credit
- Build professional trust with your nanny
- Gain peace of mind, no hidden legal liabilities down the line
What You Gain By Paying Legally
- W-2 employment status for your nanny
- Unemployment insurance if they’re laid off
- Access to Social Security and Medicare benefits for your caregiver
- Clear financial history for credit cards, loans, and insurance
- More confidence and professionalism in your relationship
Honest Care Nanny’s Take
We get it! Legal payroll can feel overwhelming. IRS forms, payroll systems, and state-specific rules? It’s a lot.
That’s why we’re here.
That’s why we’re here.
At Honest Care Nanny, we:
- Educate both parties on legal employment
- Encourage nannies to advocate for their rights
- Share tools, checklists, and resources so everyone knows what to expect
- Because when both sides understand their responsibilities, and their rights, the whole relationship thrives.
Sources & Further Reading
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