Hiring a nanny who is working out of her home

[dkelusky]

I'm going to potentially hire a nanny who will take care of my son.  All work will be in the nanny's home but I will likely give instructions on how to perform the care and provide supplies like diapers and food.  Would this nanny be a household employee and would I need to make her a W-2 employee?  Or, since all the work is at the nanny's home can I use that fact alone to say this is not a household employee (and just pay her and not worry about W-2s or 1099s)?  

Furthermore, is there anything I need to fill out in advance to verify or document this isn't a household employee?  Perhaps a contract with the nanny that indicates the work will be at her residence?  Or is there a specific IRS form I can use to confirm this individual is not a household employee?

[Carl]

From what I see at https://www.irs.gov/taxtopics/tc756 it states "Household workers are your employees if you can control not only the work they do but also how they do it."

But from what I see at https://www.irs.gov/pub/irs-pdf/p926.pdf, I interpret it in a way that makes the nanny a private contractor. By my interpretation (I am no tax expert by any stretch) the fact that the work is flat out not performed in your home or any any home or other property that you own, rent, or have other control of, disqualifies them for the household employee status.

But that's my two cents.

Based on that, you'll need to issue them a 1099-MISC. It is important that you have their taxpayer identification number before you pay them anything. It can be their SSN or their EIN - it doesn't matter. So have them fill out a provide you with IRS Form W-9 (https://www.irs.gov/pub/irs-pdf/fw9.pdf) before you pay them anything. If they refuse to provide the information, then they just flat out don't get paid - it really is that simple.

Now I'm sure you can understand a person's reluctance to provide their SSN. That's not an issue. Anybody can get an EIN in about 10 minutes and it's absolutely free at https://www.irs.gov/businesses/small-businesses-self-employed/apply-for-an-employer-identification-n... So it may just be a matter of you informing them (the nanny) of this. Note that you flat out can not claim any childcare expenses without the childcare provider's SSN or EIN.

[dkelusky]

Most of what I see online is that a 1099 for a nanny isn't appropriate.  In this instance, since the nanny is working out of her home and is controlling the work there, should I potentially just consider this an in-home day care.  In other words, if she isn't a household employee, shouldn't I consider her a self-employed sole proprietorship?  Would I need to issue a 1099 to a self-employed sole proprietorship?

[macuser_22 · Accepted solution]

If she works in her own home then she is self-employed, not you household employee.  And no, you do not provide a 1099-MISC - she simply reports her income on a schedule C.  1099-MISC form are only issued by businesses during the course of doing business - individuals that are not themselves businesses do not issue 1099-MISC forms and the nanny-babysitter does not need one to report income.

The IRS defines a baby sitter the same as a child care provider.   A "nanny" typically works in the child's home, when they work in their own home they are a baby-sitter or child care provider - the rules are the same for both of those, but a child care provider usually cares for more than one child, but do not have to.   (A child care provider might have different local requirements such as licenses and inspections but for tax purposes it makes no difference.)