How to Pay Taxes and File Your Return as a Nanny

Navigating tax responsibilities as a nanny can seem complex, but understanding these obligations is important for financial compliance. The U.S. tax system operates on a “pay-as-you-go” principle, with taxes paid as income is earned through withholding or estimated payments. This guide clarifies the steps for fulfilling your tax duties, from determining employment status to filing your annual return.

Determining Your Employment Status

The first step for any nanny is determining their employment status. The IRS distinguishes between a “household employee” and an “independent contractor” based on the hiring family’s level of control. A worker is a household employee if the family controls how and when the work is done, including setting hours, providing supplies, and directing duties. Most nannies are household employees, as families typically dictate schedules and childcare tasks.

An independent contractor controls their own work, offers services to the public, provides their own tools, and sets their own schedules. For instance, a childcare provider working from their own home for multiple families would likely be an independent contractor. This distinction dictates who pays certain taxes. Incorrectly classifying a nanny as an independent contractor can lead to penalties for the hiring family. While some nannies operate as independent contractors, most are household employees due to the family’s control.

Understanding Your Tax Obligations

As a household employee, a nanny has tax obligations similar to other employees. These include federal income tax and Federal Insurance Contributions Act (FICA) taxes, which cover Social Security and Medicare. Federal income tax is levied on your earnings.

FICA taxes fund Social Security (retirement, disability, survivor benefits) and Medicare (healthcare). For employees, the FICA tax rate is split with the employer. Your share is 6.2% for Social Security and 1.45% for Medicare, totaling 7.65% of gross wages. The Social Security portion applies up to an annual wage base limit ($176,100 for 2025), while Medicare tax has no wage limit. Some states and local jurisdictions also impose income taxes; nannies should check their specific state and local requirements.

Preparing for Tax Payments

Household employees prepare for tax payments by understanding withholding and, if needed, planning for estimated taxes. If your employer withholds taxes, they use your Form W-4, Employee’s Withholding Certificate, to determine the federal income tax to deduct. You can adjust your withholding by submitting a new Form W-4, especially if your financial or family situation changes. This form helps ensure the correct amount of tax is withheld by accounting for filing status, multiple jobs, dependents, and other income or deductions.

If your employer does not withhold federal income tax, or if you are an independent contractor, you must pay estimated taxes throughout the year. This helps avoid a large tax bill and potential penalties. To calculate estimated tax, project your income, deductions, and credits for the year. The IRS provides Form 1040-ES, Estimated Tax for Individuals, with worksheets to help determine your tax liability. Accurate record-keeping of all income and expenses is important for these calculations.

Making Tax Payments

After calculating tax obligations, the next step is making payments to the IRS. For nannies whose employers withhold taxes, the employer remits FICA taxes (both employee and employer shares) and withheld federal income tax directly to the government. This simplifies the process for the employee, as their tax liability is covered from their paychecks throughout the year.

Nannies making estimated tax payments have several methods available. The IRS encourages electronic payments like IRS Direct Pay, allowing direct payments from a bank account, and the Electronic Federal Tax Payment System (EFTPS), which offers scheduled payments. Payments can also be made by mail using vouchers from Form 1040-ES. Estimated tax payments are generally due quarterly: April 15, June 15, September 15, and January 15 of the following year.

Filing Your Annual Tax Return

The final step is filing your annual federal income tax return. As a household employee, you will receive a Form W-2, Wage and Tax Statement, from your employer by January 31 of the following year. This form reports your total wages and taxes withheld, which you use to prepare your personal tax return, Form 1040. If your employer paid cash wages of $2,700 or more in 2024 (or $2,800 for 2025) to any household employee, they must file Schedule H (Household Employment Taxes) with their own Form 1040. Schedule H reports household employment taxes, including Social Security, Medicare, and federal unemployment taxes.

If you operated as an independent contractor, you would report income and expenses on Schedule C (Profit or Loss from Business) and calculate self-employment taxes (Social Security and Medicare) on Schedule SE. You can prepare your tax return using tax software, online services, or with a tax professional. Returns can be filed electronically (e-file) or by mail. The annual deadline for filing individual federal income tax returns is April 15 of the year following the tax year.