Nanny Taxes FAQ: Parents’ Key Questions Answered
What you need to know about paying a nanny in 2025
Woo, tax season is upon us! If you’re working with a nanny or a roster of favorite babysitters, you may be feeling the tax time overwhelm right now, trying to figure out your nanny taxes and getting them right.
If you’ve already gone through our Guide to nanny taxes and still have questions, never fear. We’re rounded up the most common questions from parents about nanny taxes in 2025 and put together this FAQ where you’ll easily find the answer to your question.
If you’re concerned about what forms you need, why you can’t file a 1099 for your caregiver, or how to handle cash payments, stick with us. In this post, we’ll walk you through the fundamentals of nanny taxes for 2025 (and beyond), helping you feel confident and compliant when it comes to your household employment responsibilities.
About to hire a nanny and feeling overwhelmed about being an employer? Contact us and let us help you in your search for a great nanny. We can help you get set up in employing your ideal full-time or part-time nanny, or if you’re looking for as-needed care we can handle the whole employment business soup to nuts (taxes included!).
Nanny taxes:
Frequently asked questions
Questions answered:
1. What are nanny taxes?
The term nanny taxes refers to the set of federal and state employment taxes you’re required to and withhold and pay when you hire a caregiver as a household employee. These typically include:
Social Security and Medicare (FICA)
Federal and state unemployment taxes (FUTA, SUTA)
Federal and state income tax withholding
For 2025, families who pay a caregiver $2,800 or more in a calendar year generally must handle these nanny tax obligations. This applies whether your caregiver works part-time or full-time.
2. Why can’t I use a 1099 for my nanny?
A 1099 is reserved for independent contractors, such as freelancers who set their own hours and control how they perform a job. By contrast, nannies usually work under your direction in your home, following schedules and duties you set. This makes them household employees, not independent contractors. As a result, you should issue a W-2, not a 1099, and handle appropriate tax withholdings.
One common exception to this rule is newborn care speicalists, who may offer their services as independent contractors.
3. What are the benefits of paying nanny taxes?
Paying on the books ensures that:
You remain compliant with IRS and state regulations - aka, following the law.
Your nanny has documented employment history, which can help them qualify for benefits like Social Security, unemployment, or even loans.
You avoid potential penalties and back taxes in the event of an audit or dispute.
While it may initially seem more expensive, staying compliant protects both you and your nanny in the long run. In the pandemic, we saw so many nannies unable to apply for unemployment because they had no documented income; we also saw a lot of parents having to pay back taxes when nannies put their names as employers in unemployment applications.
4. Will I get in trouble if I pay my nanny under the table?
In short: yes. Paying “under the table” can lead to serious consequences:
IRS penalties and interest on back taxes.
Potential legal issues if you are found to be evading employment taxes.
Difficulty resolving disputes if your nanny later files for unemployment or tries to verify income.
While many families might be tempted to avoid the paperwork, paying your nanny off the books puts you at risk for significant liability.
5. Do I need to pay taxes for my part-time babysitter?
If you pay your babysitter or nanny more than the annual threshold ( $2,800 for 2025) over the course of the year, you’ll need to treat them as a household employee and file nanny taxes accordingly. Even if they’re part-time, the IRS views cumulative earnings the same way, so it doesn’t matter if it’s a full-time nanny, a summer-only babysitter, or an after-school nanny. The only thing that matters is that threshold.
If the total wages stay below that threshold, you may not owe certain employment taxes—but it’s important to track the total to avoid surprises at tax time. Also note, your babysitter still needs to report all of their income when they file their taxes, even if it doesn’t hit the $2,800 mark with you specifically.
(If your nanny has questions about their taxes, pass along this updated 2025 guide to taxes, specifically for nannies and babysitters, for helpful info!)
6. Can I pay my nanny cash?
You can pay your nanny by cash, check, Venmo, or any other payment method, but the form of payment does not exempt you from tax obligations. Even if you pay in cash, you are still required to:
Withhold and pay the correct employment taxes.
Issue a W-2 if the nanny’s annual earnings meet or exceed the threshold.
Keep accurate records of wages paid, taxes withheld, and dates of employment.
7. What tax forms do I need to file nanny taxes?
As a household employer, you typically need:
Form W-4 from your nanny when they start, so you know how much tax to withhold.
Form I-9 from your nanny, also upon hire to confirm their identity and eligibility to work legally in the U.S.
Form W-2 to report wages paid each year (issued to your nanny and filed with the Social Security Administration).
Schedule H (Form 1040) to report household employment taxes on your personal income tax return.
State-specific forms, if applicable, for unemployment or other state-based taxes.
There may be other forms required, for instance to earn tax credits for your expenses,. Also remember to check your state’s guidelines for any additional requirements, such as new hire reports to the labor department.
8. If I run a business, can I put my nanny on business payroll?
Generally, no. Nannies are considered household employees, not employees of your business – even if you operate your business from home. Mixing business payroll and household employment can lead to IRS red flags. You should keep personal household employment taxes separate from your business payroll to maintain clear and compliant financial records.
You’re in good hands with Smart Sitting
If you’re looking to hire a nanny or babysitter, but feel overwhelmed by the whole process – we get it! From weeding through a pool of candidates and trying to figure out what’s important to you and how to accurately gauge a resume, interview, references, and gut feeling, to drawing up an employment contract and navigating being an employer as well as a parent, it’s a lot to handle on your own.
We started Smart Sitting with those concerns in mind. For over 15 years, we have helped connect families with amazing, dedicated – and pre-vetted – childcare pros, but we don’t disappear with the handshake. We continue to provide helpful resources and support to both families and caregivers. We believe it takes a village, and we’re in it. We’ve also partnered with seasoned nanny tax veterans to get you a good deal in case you want to hand over the whole tax ordeal and focus only on how great working with your new nanny is.
Looking for an experienced babysitter or nanny that’s just right for your family? Tell us more via the button below and a dedicated team member will get you there.