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.

Cancel Your Subscription

Canceling involves two parts: your year-end tax work and your subscription billing. Please complete both.

Before you cancel, please note:

There is no pause option — payroll tax filings are required even when you’re not paying wages.
If you have an active subscription, your year-end tax work (W-2s, Schedule H, quarterly returns) is handled automatically — no action needed.
Once canceled, you can still sign in and access your records (pay stubs, W-2s, tax history), but you will not be able to run payroll or generate new paychecks.

Year-End Tax Work

Required for all users, regardless of billing method

When you cancel, you may still have remaining tax obligations for the current year, including:

Quarterly or final state filings
Closing state tax accounts that were already opened
Any required federal estimated tax payment
W-2 and W-3 filings in January
Schedule H with your personal tax return

You have two options:

Recommended

We handle your year-end — $149

Nest Payroll completes all remaining tax filings, W-2s, Schedule H, and state account closures on your behalf. No work on your end.

Handle it yourself

You are responsible for all remaining federal and state filings, W-2 preparation, and closing your state accounts.

Complete the cancellation form inside your Nest Payroll account to let us know your year-end preference. This is required whether you subscribed through our website or through Apple.

Stop Your Subscription Billing

Steps differ depending on how you subscribed

Website / Stripe subscribers

Complete the cancellation form (Part 1). We cancel your subscription immediately — no further action needed.

Apple subscribers

Complete the cancellation form (Part 1), then cancel through your device — we cannot cancel Apple subscriptions on your behalf.

Settings → [Your Name] → Subscriptions → Nest Payroll → Cancel

If you selected the $149 year-end service, we handle that work separately after your subscription ends.

JUST NEED TO UPDATE YOUR CREDIT CARD?

If you’re not canceling and just need to update your payment method:

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Apple subscribers

Settings → [Your Name] → Payment & Shipping

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