You’ve found a nanny to care for your children and now comes the conversation of payment and taxes. If your nanny doesn’t want you to report her wages or pay taxes, how should you respond? It may be convenient to pay your nanny under the table, but not only is this illegal, it could be very costly if you end up getting caught. Failure to pay nanny taxes could result in hefty penalties and fines, often in the thousands of dollars range.
In the eyes of the law, your nanny is considered your household employee, not someone that you can pay secretly. If you do, it can put your family at risk or could jeopardize your employment or career advancement if you are found guilty of tax fraud. Do your research: you may need to withhold Social Security and Medicare on the wages she earns and include them on her payroll stub, and you may need to pay federal and state unemployment tax.
A simple mistake in nanny tax preparations could mean unexpected taxes, costs, or penalties, so it is important to prepare your nanny taxes with accuracy and attention to detail. Planning ahead and working with a household payroll specialist from the get go is a great way to get you and your nanny set up for accurate tax deductions and efficient payroll distribution for the duration of your nanny’s employment.