Payroll Basics

💼 Payroll Basics for Families Hiring a Nanny

What You Need to Know as a Household Employer

If you pay a nanny more than $2,700/year (as of 2024), the IRS classifies you as a household employer — and that comes with legal responsibilities.

Here’s what you need to do to stay compliant and protect both your family and your nanny:

✅ 1. Obtain an Employer Identification Number (EIN)

• Apply for free at IRS.gov

• This allows you to legally pay and report wages

✅ 2. File a New Hire Report

• Required in most states within 20 days of hire

• In Pennsylvania, report at: https://www.humanservices.state.pa.us/csws

✅ 3. Pay Legally (W-2, Not 1099)

❌ Do NOT issue a 1099 — this is for independent contractors.

✅ Nannies must be paid as W-2 employees with taxes withheld.

✅ 4. Withhold & Pay Employment Taxes

You (the employer) are responsible for:

• Social Security (6.2%)

• Medicare (1.45%)

• Federal Unemployment Tax (FUTA)

• State Unemployment Tax (SUTA – varies by state)

Your Nanny’s Share (you withhold from paycheck):

• Social Security (6.2%)

• Medicare (1.45%)

• Federal income tax (optional but recommended)

• State/local income tax

📊 Total employer cost = ~10–12% on top of wages

✅ 5. Provide a Pay Stub / Record of Earnings

Even if you pay via Venmo or check, you must track gross pay, withholdings, and net pay.

Use a spreadsheet or payroll service (see below 👇)

✅ 6. File Year-End Forms

You must:

• Provide your nanny a W-2 by Jan 31

• File a Schedule H with your personal tax return

• Submit federal & state tax payments quarterly or annually

✅ 7. Consider Using a Nanny Payroll Service

To make it easy, many families use services that automate tax filings and direct deposit:

SurePayroll~$50/month Payroll + tax compliance : https://referrals.surepayroll.com/mQCb6T3

Poppins Payroll~$45/month Budget-friendly, easy setup : https://www.poppinspayroll.com

HomeWork Solutions : https://www.homeworksolutions.com

💡 Bonus Tips:

• You may be eligible for tax credits for nanny wages through the Dependent Care Tax Credit

• If your nanny drives for work, track mileage reimbursements (not taxable)

• Offering legal pay can help your nanny build credit, qualify for loans, and access benefits