What to Do If Your Nanny Doesn’t Have a Social Security Number

Hiring a nanny comes with responsibilities, including ensuring they can legally work and that you meet tax obligations as their employer. A common challenge arises when a nanny does not have a Social Security number (SSN), complicating payroll taxes and legal documentation. However, there are ways to handle this while staying compliant with tax laws.

Household Worker Classification

Determining whether a nanny is a household employee or an independent contractor is essential. The IRS typically classifies nannies as household employees because families control their work schedule, tasks, and tools. This classification requires families to withhold and pay employment taxes.

If a nanny earns more than $2,600 in 2024, Social Security and Medicare taxes must be withheld. Additionally, if total wages reach $1,000 in any calendar quarter, employers must pay federal unemployment tax (FUTA) at 6% on the first $7,000 of wages. Many states also require unemployment insurance contributions, which vary by location.

Misclassifying a nanny as an independent contractor can lead to penalties, back taxes, and interest charges. Families should follow IRS guidelines to avoid legal and financial consequences.

Employer Reporting Requirements

Once a nanny is classified as a household employee, families must obtain an Employer Identification Number (EIN) from the IRS. This number is required for reporting wages and employment taxes and can be obtained online.

Employers must report wages on Form W-2, providing a copy to the nanny by January 31 and submitting another to the Social Security Administration (SSA). Filing electronically through the SSA’s Business Services Online portal helps prevent errors and delays.

Employment taxes, including Social Security, Medicare, and unemployment taxes, must be reported on Schedule H, filed with the employer’s personal tax return (Form 1040). If employment taxes exceed $1,000 for the year, quarterly estimated payments using Form 1040-ES may be required to avoid penalties.

Identification Options for the Worker

If a nanny does not have a Social Security number, they must obtain an alternative form of identification for tax compliance. One option is an Individual Taxpayer Identification Number (ITIN), issued by the IRS to individuals who need to file tax returns but are not eligible for an SSN. To apply, the nanny must submit Form W-7 with supporting documents, such as a passport or birth certificate. Processing can take several weeks, so applying early is recommended.

If the nanny is authorized to work in the U.S. but does not yet have an SSN, they should apply through the Social Security Administration using Form SS-5. Employers can temporarily report wages using a placeholder number but must update records once the SSN is issued.

Some states require additional identification, such as a driver’s license or state-issued ID, for employment verification. Employers should check local labor laws to ensure compliance. If the nanny is on a visa that permits employment, a work permit (Employment Authorization Document) may be required.

Recordkeeping Methods

Accurate records are essential for tracking wages, tax payments, and compliance with labor laws. Employers should document payment amounts, hours worked, and any benefits provided. Payroll software or household employment services can simplify tax calculations and ensure proper deductions. Digital payroll platforms like HomeWork Solutions and SurePayroll offer automated tax calculations and electronic pay stubs, reducing errors.

A written employment agreement outlining wages, overtime policies, and paid time off can help prevent disputes. Employers should also maintain logs of work schedules and any reimbursements for job-related expenses. The IRS requires wage payment records to be kept for at least four years to support tax filings in case of an audit.