Legalities of Putting Your Nanny on Payroll

As a nanny placement agency, we’re asked regularly about the legalities of putting your nanny on payroll. Our recommendation is that you should always pay your household employees on the books. The reason for this is, if you have a nanny, either full or part-time, you are technically a household employer. That means you have legal requirements both locally and federally.

When your nanny expenses total more than $2,200 per year, you should be paying your nanny on payroll. Not under the table or off the books. Not only is it the law, but it provides both of you with certain benefits.

Family Benefits of a Nanny on Payroll

When you send your child or children to a daycare, they provide you with a receipt at the end of the year with your total child care costs. These costs can be included in your itemized taxes providing you with a child care credit. The credit varies based on the number of children.

Not only can you take a tax credit based on what you paid out, but also on your qualifying expenses associated with the childcare. This can also be done when you put your nanny on payroll.  Additionally, if your company offers a pre-tax Financial Spending Account (FSA), the only way to use those funds is by having your nanny on payroll.

When you pay a nanny cash without having them on your household payroll, you miss out on these tax credits and the ability to use your FSA.

The benefits to the nanny are even greater. First, they accrue Social Security and Medicare benefits. They also become eligible for unemployment should they lose their job through no fault of their own. Plus, depending on state and local laws, they are eligible for holidays and earn vacation and sick time.

As a nanny placement agency, we recommend to every prospective family that they set up their household with an EIN so they can easily bring their nanny onto payroll. Once you have done so, we recommend getting your nanny on payroll through HomePay. Whether you are located in the Bay Area, Los Angeles, or Colorado, HomePay has got you covered.

If you’re looking for a nanny for your family, call Kindred Families Agency at (925) 532-1107 today.