You found her. She's wonderful. The baby lights up every time she walks in the door.
And now you're staring at a blank W-4, wondering if you've accidentally gotten yourself in trouble with the IRS.
You haven't. You're just new to this, and that's completely okay. Here's your roadmap.
First, take a breath. You're not late.
Most families don't even think about the payroll piece until a week or two after their nanny starts. As long as you sort it out before her first payday, you're in great shape.
And if that first payday has already come and gone? That can be straightened out too. You're not in trouble.
Get your EIN
An EIN is an Employer Identification Number. Think of it as your tax ID as an employer, basically how the IRS knows you're paying someone. You need one to run payroll legally, but getting one is easier than it sounds.
When families enroll with HomeWork Solutions, we take care of obtaining the EIN for you, at every service level. We also register you with your state's tax and labor agencies, which is honestly the more complicated part of the process and where most people get tripped up.
If you decide to handle it yourself, start with the IRS, then check your state's individual requirements from there.
Have your nanny complete three forms on day one
Three pieces of paperwork set the foundation for your working relationship:
- Form I-9 confirms she's legally authorized to work in the U.S. You'll check her ID against the form.
- Form W-4 tells you how much federal tax to withhold from her paychecks.
- Your state's withholding form does the same thing for state taxes.
Tuck these into a folder, paper or digital. You won't look at them often, but when you need them, you'll really need them.
Decide how you'll actually pay her
You have three real options, and we'll be honest about all of them.
Option 1
Handle it yourself in a spreadsheet. Technically possible, but genuinely painful. You'd be calculating federal withholding, Social Security, Medicare, state taxes, and unemployment insurance yourself, then filing with multiple agencies on their own schedules, then producing year-end documents for both you and your nanny. Many families who go this route don't stick with it for long. Get an idea of what is required in your state by viewing our state-specific tip sheets.
Option 2 — recommended
Use a payroll service built for household employers. This is what we do. You report her hours, we handle everything else, and come January, both you and your nanny receive everything you need for taxes.
Option 3
Pay her cash and hope it works out. Please don't. We'll cover the full picture in a future post, but the short version is that it puts both of you at real financial and legal risk, and quietly takes away benefits your nanny has earned and deserves.
Register with your state
Every state has its own process for household employers, and they vary quite a bit. California is not Texas. New York is not Florida.
One thing worth knowing early: some states require quarterly filings for unemployment insurance and even sooner for withheld income taxes, while others allow annual filings for household employers. Getting on the right schedule from the start helps you avoid penalty notices down the road.
This is one of the things we handle automatically for the families we work with. If you're going it alone, your state's Department of Revenue or Department of Labor website is the place to start.
Set the rhythm
Choose a pay schedule (weekly or bi-weekly are the two most common), set up direct deposit, and make a habit of providing a pay stub with every paycheck (it’s required in most states). This kind of consistency builds trust faster than almost anything else.
A quick note on timing: you pay her after she works, not before. This is called paying in arrears, and it's how nearly every employer in the country does it. She works Monday through Friday, and you pay her the following Friday for those hours. It's standard, and it's what makes accurate payroll actually possible.
If your nanny has worked in other households before, she likely already knows this rhythm. If she's newer to household employment, a simple chat can keep th lines of communication clear: "You'll be paid each Friday for the week before."
Why it matters
Paying on the books protects her too
This part is worth sitting with for a moment, because the protections here aren't just about you. When your nanny is paid on the books, she gets:
- Social Security and Medicare credits toward her future retirement and healthcare
- A documented work history that helps her qualify for future jobs, apartment leases, auto loans, and mortgages
- Unemployment insurance eligibility if she ever loses her position through no fault of her own
- Access to paid family leave, paid medical leave, or short-term disability in states that offer them
These are benefits she's earned through her work. Cash arrangements quietly make them harder to obtain. Paying on the books is the professional standard. It's also just the right thing to do.
The four things you'll handle at year-end (so you can stop worrying about them now)
When the year wraps up, you'll take care of four things:
- Provide your nanny with a W-2 (due by January 31)
- File Schedule H with your personal tax return
- Submit your state's annual reconciliation, if your state requires it
- Have a quick conversation with her about any updated compensation for the year ahead
If you're using a service like ours, three of those four things happen automatically. If you're not, put them on your calendar now so they don't sneak up on you.
You've got this.
Household payroll can feel overwhelming at first. It really does. But within a few months, once the rhythm is established and you've gotten through year-end once, it starts to feel completely manageable.
And if you'd rather skip the learning curve entirely? That's exactly what we're here for. A short call with our team can take the whole thing off your plate before her next paycheck.