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Tax Considerations when Hiring a Nanny


To satisfy the IRS and remain a happy law abiding citizen, you’ll need to assume the role of employer and pay employment taxes (Social Security, Medicare, etc.), report payroll withholdings (taxes, insurance benefits and the like) and of course, make sure that she is legally able to work in the United States.


Here are a list of quick steps to get started:

Obtain state and federal EIN (Employer Identification Numbers)
You can obtain a federal EIN instantly on-line or you can download the SS-4 form and mail it, or call the IRS. To obtain your state EIN, you’ll need to contact your state government.

Verify Work Eligibility
To verify U.S. work eligibility, you will need to complete an I-9 form and follow the U.S. Citizenship and Immigration Office’s procedures.

Setup Payroll and Withholding Tracking
You must track the amounts that you pay your nanny and the amounts that you withhold from her pay. You are not required to withhold federal income tax, however your nanny is required to pay federal taxes based on her income. You may choose to withhold though to save your nanny time and possible IRS fines for tax underpayment. If you choose to withhold, you will need your nanny to complete a W-4 form that you must keep in your records. You will use the information provided on the W-4 to calculate the federal withholding amounts. Periodically (usually at the end of each quarter) you must pay to the IRS the amounts you’ve withheld and also file a form 1040ES.

If you pay your nanny more than $1500 (for tax year 2006), you are required to pay social security and Medicare tax. The amount you are required to pay is roughly 15.3% of her gross wages. You may pay the full amount yourself, or you may deduct 50% of the amount from your nanny‘s wages. You’ll pay these taxes on a quarterly basis and at the end of the year, you’ll file a Schedule H to report the amounts.

End of Year Reporting
At the end of each year, you will need to report the wages you’ve paid and any withholding amounts. In most instances, you will file a Schedule H along with your regular 1040 tax return.

You will need to provide your nanny with a W-2 form detailing her gross wages and all withholdings and deductions for the year. You must provide your nanny with her W-2 by January 31st and you’ll need to report the wage information to the IRS by February 28th using a form W-3.

If you’d rather spend time enjoying your free time and let someone else manage your tax payment and filing requirements, there are numerous companies that provide the service to nanny employers, such as PayCycle and Breedlove Associates.

We’re not tax professionals and this information is provided to help you perform your own due diligence and research related to hiring a nanny. As with all tax matters, we recommend that you consult with a professional tax advisor or Certified Public Accountant.




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Finding the Perfect Nanny

Finding the Perfect Nanny

lead-cap-shot-1People don’t live in fairytales, and it’s impossible for every family or every mother to find her own Nanny McPhee. However, even if you can’t find a magically skilled nanny, you can find the perfect nanny that your child needs, and all you need are some skills of your own in interviewing them and setting your priorities.

Everyone knows that every child is different, so not everyone will get along with your child, especially if he or she has some preferences or if it’s needed some special attention. Because of this, we’ve thought about creating a list that will help you out in choosing the perfect nanny for your child very easy.

Your Priorities

This is the first step – you have to decide what are your priorities when choosing a nanny, and it’s best to talk this through with your partner. There are several questions that you need to answer truthfully, and it’s about if you want a nanny who is older (meaning mature) and with experience, or if you want someone who is younger and who can relate easier with your child. Another thing that you need to take into consideration is if you want that nanny to have a special degree – early childhood education would be a good choice.

You’ll also need to answer yourself how much independence will you offer to the nanny in taking care of your child, or if you need someone just to feed, bathe and provide transportation for your boy or girl.

Apart from this, you can also consider any other thing that is important to you, so when you’ve done with your list, you can start interviewing nannies or you can talk directly to a nanny agency.

NannyA Thorough Research

When you start this process, make sure you let everyone know that you’re in search for a nanny. You can also post on Facebook or on Twitter, as the social media is a wide environment that gets the word around pretty fast. Your friends or members of the family might also recommend you someone, or they will be able to tell you who might know.

Another thing that you really have to do is to talk to the professionals in this area – this means that you can go to a nanny training program and see if you can find someone who is qualified for what you need. Apart from this, there are also the private nanny placement agencies who can make some recommendations based on what you look for.

The Internet

This is another great resource when you’re looking to hire a nanny. There are plenty of websites that advertise for this, and you’ll find that there are plenty of women (usually) who offer their services as nannies or baby-sitters. It’s great if you can narrow down your search in your local area, and once you do this, you can browse through their resumes to see what matches and what doesn’t match with the list you have made (the priorities that you have set up in the beginning).


Once you’ve gone through all the possibilities, gather all the resumes that have attracted you and start interviewing the possible nannies. It will be very easy to talk to them, as you will get a first impression based on what you feel and not on what is written on the paper. You’ll see if they are nice or not, if they really have all the skills they say they do and so on. Apart from this, the first impression is what always counts, so keep this in mind when you make the choice.