We understand. Paying your nanny or senior caregiver in cash might seem like the simplest route. No forms, no tax calculations, no complicated paperwork—just an easy, direct exchange. Especially when you're juggling the care of young children or an aging parent, the idea of a quick fix can feel tempting.
But here’s the reality: what feels simple today can cause major headaches tomorrow. Paying a caregiver “under the table” is not only illegal—it puts both you and your caregiver at significant risk. Let’s walk through why this seemingly easy option is something you should absolutely avoid, and what a better alternative looks like.
Why Some Families Consider Paying in Cash
There’s often no ill intent. Most families who pay cash think they’re helping their caregiver by avoiding taxes, or they’re simply unaware that their household worker qualifies as an employee under the law. Here are a few common reasons people give:
- “We only need part-time help.”
- “She agreed to it—it’s what she prefers.”
- “I don’t want to deal with the IRS.”
- “I thought this only applied to businesses, not families.”
It’s natural to feel overwhelmed by the idea of employment taxes and compliance—but that’s where professional support can make all the difference.
The Legal Reality: Cash ≠ Tax-Free
Whether you pay your caregiver by check, cash, Zelle, or any other method, you are still required to pay employment taxes. If you control when, how, and what work is done, that caregiver is legally your household employee—not an independent contractor—and you’re their employer.
So yes, even cash payments must be reported to the IRS. Failing to do so constitutes tax evasion, with very real consequences.
Risks of Paying a Nanny or Caregiver "Under the Table"
IRS Penalties and Tax Evasion Charges
Paying cash without reporting income or paying employment taxes can trigger audits, penalties, and even criminal charges. You may be required to pay not only back taxes, but also interest and steep fines.
Loss of Legal Protections
If your caregiver is injured on the job and you don’t have workers’ compensation insurance (only available when paying legally), you could be held personally liable for medical expenses and lost wages.
No Access to Unemployment or Social Security
If your caregiver is paid off the books, they won’t easily qualify for unemployment benefits if you let them go—or Social Security benefits later in life. That’s not just unfair—it’s unsustainable for their long-term well-being.
Important Note: Former employees who worked off the books can still file a claim for unemployment benefits, which may trigger an investigation into their employment history with your household.
Potential Lawsuits
If there’s a disagreement or falling out, an off-the-books arrangement leaves you open to wage disputes or lawsuits. Without a formal payroll record, it’s your word against theirs in court. Lawsuits will also likely trigger tax compliance investigations.
Why Legal Payment is a Win-Win
Legal compliance may sound daunting, but it offers critical protection for both families and caregivers:
- For you: It shields you from legal and financial liability, qualifies you for tax breaks (like the Child and Dependent Care Tax Credit or Flexible Spending Accounts), and builds a documented, professional employment relationship.
- For your caregiver: It ensures access to essential benefits, contributes to their Social Security and Medicare, and gives them verifiable income for credit, housing, and future employment.
Can I Still Pay in Cash and Be Legal?
Yes! You can absolutely pay your caregiver in cash as long as you’re paying the proper employment taxes, filing the necessary forms (like a W-2), and following all wage and hour laws.
But be careful: Proper documentation is key. Without records, you’ll lack details on how taxes were handled, leaving you open to potential penalties.
How to Make It Easy: Let Us Do the Heavy Lifting
Handling all the legal responsibilities yourself can feel overwhelming, but it doesn’t have to be.
HomeWork Solutions has specialized in household payroll since 1993. We’ll:
- Register you as a household employer
- Withhold and remit all necessary taxes
- Provide required record keeping and documentation
- Create year-end documents such as W-2s for your employees and a Schedule H for your filing
- Help you secure workers’ compensation and other insurances as needed
- Help keep you compliant with federal and state law
We make the process smooth, legal, and worry-free—so you can focus on what matters most: your family and your peace of mind.
Final Thought: Do Right by Your Caregiver—And Yourself
Your nanny or senior caregiver plays a critical role in your family’s life. Paying them legally isn’t just a matter of following the law—it’s a way to show respect, build trust, and protect both of your futures.
Schedule your FREE consultation with HomeWork Solutions today and find out how easy it is to do the right thing the right way.