Why Paying Your Nanny Legally Is a Win for Everyone

When you hire a nanny, you’re welcoming someone into your home to care for what’s most precious to you—your kids. Treating them as a professional not only shows respect but also protects you as an employer.

According to the IRS, nannies are considered household employees, not independent contractors. This distinction is key: if you can control what work is done and how it’s done, your nanny is your employee, even if they work part-time. On the other hand, independent contractors typically control their own work process, provide their own tools, and make their own schedule.

What does legal pay involve?

There are a few key financial thresholds to keep in mind when paying your nanny:

• If you pay $2,700 or more in cash wages in 2024, Social Security and Medicare taxes apply. If your nanny earns less than this amount, these taxes aren’t required—but it’s important to check for updates each year.

• Additionally, if you pay household workers $1,000 or more in a calendar quarter, you’re responsible for federal employment taxes.

While federal income taxes are ultimately the employee’s responsibility, it’s best practice to withhold them from your nanny’s wages. This not only simplifies things for your nanny but also helps them avoid large tax bills when filing their annual returns.

Legal pay also includes providing a W-2 and contributing to Social Security, Medicare, and possibly unemployment insurance. While this might sound complex, it’s easier than you think—and the benefits are significant.

Why it’s worth it

Paying legally protects you from fines, audits, and legal issues while providing your nanny with valuable benefits like unemployment insurance and the ability to build credit. It also fosters a professional, trust-based working relationship.

How to make it simple

If the paperwork feels overwhelming, you’re not alone! Services like GTM Payroll Services and HomeWork Solutions specialize in household employment, making compliance stress-free.

By paying your nanny legally, you’re safeguarding yourself, supporting your nanny’s financial security, and building a solid foundation for your family’s care. It’s a win-win—and simpler than you might expect.