How Do Taxes Work When You Hire a Nanny?
The difference lies in the way you pay your nanny and how he or she claims the income on his or her income taxes. If your nanny is a W-2 employee, you must withhold taxes from each paycheck, including Social Security and Medicare taxes. If your nanny and other household workers are independent contractors, then the person doing the work is responsible for paying their employment taxes on their own.
The laws determining whether someone who works for you is an employee or a contractor are complex. You should always consult an accountant or tax attorney if you are unsure of whether you should be withholding Social Security, Medicare, or other employment taxes — or if you should be paying nanny taxes.
Forms for Nannies to Fill Out When Filing Taxes
As an employee, you will receive a W-2, and you would file federal and state taxes as you normally would when working for any employer that gives you a W-2.
- If you are an independent contractor, even for cash wages, you must claim your child care income on your tax returns and pay taxes throughout the year.