How to Handle Nanny Taxes in Virginia

Hiring a household employee, such as a nanny, in Virginia makes you an employer in the eyes of the law. These employment taxes, commonly called “nanny taxes,” include Social Security, Medicare, and unemployment taxes. The process involves determining if you owe taxes, gathering the correct information, registering with government agencies, and fulfilling payment and reporting duties.

Determining Your Tax Obligations

You must first classify the individual working in your home. A person is a household employee if you control both the work that is done and how it is done, such as setting their schedule and providing supplies. This is common for nannies, housekeepers, and senior caregivers. You cannot classify a worker as an independent contractor to avoid taxes if the working relationship meets the definition of an employee.

For 2025, if you pay a household employee cash wages of $2,800 or more during the year, you must pay Federal Insurance Contributions Act (FICA) taxes. These taxes fund Social Security and Medicare. The total FICA tax rate is 15.3%, with 7.65% paid by you and 7.65% withheld from the employee’s wages. Your portion consists of 6.2% for Social Security and 1.45% for Medicare.

If you pay total cash wages of $1,000 or more to household employees in any calendar quarter, you are responsible for Federal Unemployment Tax Act (FUTA) taxes. The FUTA tax is 6% on the first $7,000 of each employee’s annual wages and is paid by the employer. Employers who pay state unemployment taxes on time can often receive a credit, reducing the effective FUTA rate to 0.6%.

In Virginia, you must pay state unemployment (SUTA) taxes if you pay $1,000 or more in total cash wages to domestic employees in a calendar quarter. For new employers, the SUTA tax rate is 2.5% on the first $8,000 of each employee’s wages and is paid by the employer. Withholding federal and Virginia income taxes is optional and requires an agreement between you and your employee.

Information and Forms to Complete Before Paying Taxes

Before you can register or pay taxes, you must collect specific information from your employee. You will need their full legal name, current address, and Social Security Number (SSN). An Individual Taxpayer Identification Number (ITIN) cannot be used in place of an SSN for employment purposes.

You must verify your employee’s authorization to work in the U.S. by completing Form I-9, Employment Eligibility Verification. The employee completes Section 1 by their first day of work. Within three business days of their start date, you must examine their eligibility documents and complete Section 2. Form I-9 is not submitted to any agency but must be kept on file for three years after the hire date or one year after employment ends, whichever is later.

If you and your employee agree to withhold income taxes, two forms are necessary. For federal income tax, your employee must complete Form W-4, Employee’s Withholding Certificate, to determine the amount to withhold. Similarly, for Virginia state income tax, your employee must complete Form VA-4, Employee’s Withholding Exemption Certificate.

You will need to obtain two identification numbers to report and pay taxes. For federal taxes, you must get a Federal Employer Identification Number (EIN) from the IRS, as you cannot use your personal Social Security Number. For state taxes, you will need a Virginia Tax Account Number from the Virginia Employment Commission for unemployment and the Department of Taxation for withholding.

Registering as a Virginia Household Employer

To register as an employer, first obtain a Federal Employer Identification Number (EIN) from the IRS. The quickest method is the free online application, which provides the EIN immediately. When applying, identify yourself as a “Sole Proprietor” and then a “Household Employer.” Applying by fax or mail with Form SS-4 takes longer.

Next, you must register with the Virginia Employment Commission (VEC) for a state unemployment (SUTA) tax account. This is done by submitting Form VEC-FC-27, Report to Determine Liability for State Unemployment Tax. You can register online for immediate processing or submit the form by mail or fax.

If you plan to withhold Virginia income tax, a separate registration is required with the Virginia Department of Taxation to establish a withholding account. Household employers can register for an annual filing status by submitting Form R-1H, Virginia Household Employer Registration Form. This form, which simplifies the payment process, can be filed online, by fax, or by mail.

Ongoing Payment and Reporting Responsibilities

Once registered, you have recurring responsibilities for paying taxes and filing reports on both the federal and state levels. These duties follow specific timelines throughout the year.

Federal employment taxes (FICA and FUTA) are reported annually on Schedule H, which is filed with your personal Form 1040 tax return. While the final payment is due with your return, you may need to make estimated tax payments during the year using Form 1040-ES. These payments should account for your household employment taxes to avoid underpayment penalties.

By January 31 of the following year, you must provide your employee with Form W-2, Wage and Tax Statement. This form details their annual wages and the amounts withheld for taxes. You must also file a copy of Form W-2, along with Form W-3, with the Social Security Administration by January 31.

For Virginia SUTA taxes, you must file a quarterly report using Form VEC-FC-20 and Form VEC-FC-21 with the Virginia Employment Commission. These reports detail employee wages and calculate the SUTA tax due. The reports and payments are due by the last day of the month after each quarter ends:

• April 30
• July 31
• October 31
• January 31

If you withhold Virginia income tax, your reporting frequency depends on your filing status. Employers who registered for annual filing with Form R-1H will file Form VA-6H by January 31 to report and pay the previous year’s tax. All employers who withhold must also file an annual reconciliation, Form VA-6, by January 31.