Do I have to pay taxes if I hire a nanny?

Yes. If you pay a household employee $2,800 or more in 2025 ($3,000 in 2026), the IRS considers them a household employee and requires you to withhold and pay Social Security, Medicare (FICA), and federal/state unemployment taxes. This is commonly called the nanny tax. Failing to pay can result in penalties, back taxes, and interest.

Is my nanny a W-2 or 1099 employee?

Nearly always a W-2 employee. Because you control when, where, and how your nanny works, the IRS classifies them as a household employee — not an independent contractor. Issuing a 1099 instead of a W-2 is a common mistake that can trigger IRS penalties for both you and your nanny.

What happens if I pay my nanny under the table?

You risk IRS penalties including back taxes, interest, and fines that can exceed the original amount owed. If your nanny files for unemployment or gets injured on the job, you could face additional legal and financial liability. The good news: you can get caught up and become compliant retroactively. Use our free catch-up calculator to see exactly what you'd owe.

What is Schedule H and do I need to file it?

Schedule H (Form 1040) is the IRS form used to report household employment taxes. You must file it with your personal tax return if you paid a household employee above the annual wage threshold. It covers Social Security, Medicare, and federal unemployment tax (FUTA) for your employee.

How much does a nanny payroll service cost?

Nanny payroll services typically range from $39 to $75+ per month. Nest Payroll is $42/month with everything included — payroll processing, tax withholding, quarterly filings, year-end W-2s, and Schedule H preparation. There are no setup fees, and you can try it free for 14 days.

How do I set up payroll for my nanny?

You'll need to apply for an employer identification number (EIN), register for state tax accounts, determine the correct withholdings, and set up a system for regular pay stubs and tax filings. With a payroll service like Nest Payroll, this entire process takes about 5 minutes — we handle the EIN, state registrations, and all filings for you.

Can I get in trouble for not filing nanny taxes in previous years?

Yes, the IRS can assess back taxes, penalties, and interest for unfiled nanny taxes. However, voluntarily getting compliant before the IRS contacts you typically results in far lower penalties than being caught in an audit. Nest Payroll offers a dedicated catch-up service — use our free catch-up calculator to estimate what you owe, and we'll handle the rest.

What tax forms do I need to give my nanny?

You need to provide your nanny with a W-2 by January 31 each year. You'll also file a W-3 (transmittal form) with the Social Security Administration, and report household employment taxes on Schedule H attached to your personal Form 1040. Quarterly state filings may also be required depending on your state.

Paid your nanny off the books? Don't stress — just fix it.

We make it simple to catch up on back taxes and get compliant. Most families are caught up within days.

Sign up and request catch-up

Create your account and add your employee with their actual start date — even if it was years ago. Tap "Request Catch-up" and we'll walk you through the process.

Enter the wages you paid and hours worked

Tell us what you paid each quarter. We calculate everything — federal taxes, state taxes, and any penalties owed.

We file everything and get you compliant

Review your tax details and authorize us to move forward. We file all overdue returns, make tax payments, and set you up for compliant payroll going forward.

What we'll complete for you.

Everything needed to get fully caught up.

Set up your federal and state tax accounts
File W-2s and employer W-3 with the Social Security Administration
File and facilitate payment for any taxes owed to your state
Provide your employee with a W-2 for each tax year
Facilitate your federal tax payment to the IRS
Provide you with a Schedule H for your 1040 personal taxes
File any new hire reports to your state as needed

Catch-up pricing

$42/month per employee for previous wages, 3 month minimum, beginning with your employee's correct start date. Plus a $149 year-end tax work fee per catch-up year.

Once caught up, continue on any regular payroll plan starting at $42/mo.

Estimate your catch-up cost →

FAQs

Do I owe nanny taxes if I paid my nanny cash?

Yes. If you paid a household employee above the IRS threshold, you are required to pay Social Security and Medicare taxes. These are commonly referred to as nanny taxes.

How much are back nanny taxes?

Back nanny taxes typically include Social Security, Medicare, federal unemployment taxes, and state unemployment taxes based on the wages paid. Estimate what you owe →

Can I file nanny taxes late?

Yes. Families can catch up on nanny payroll taxes by reporting past wages and paying any taxes owed. Catching up voluntarily usually results in lower penalties than waiting for the IRS to discover the issue.

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Catch-Up Calculator Estimate back taxes owed on previous wages

Nanny Payroll Calculator Estimate take-home pay and employer taxes

Nanny Contract Template Create a work agreement for your employee

Paid your nanny off the books? Don't stress — just fix it.

Sign up and request catch-up

Enter the wages you paid and hours worked

We file everything and get you compliant

What we'll complete for you.

Catch-up pricing

Do I owe nanny taxes if I paid my nanny cash?

How much are back nanny taxes?

Can I file nanny taxes late?

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