1099NEC to NannyTaxW2

[hameshatumkochaha]

Hi,

Until recently, I did not know of a nanny tax procedure to be followed: https://www.care.com/hp/how-to-pay-n[product key removed]elf 

For the year 2022, we paid $3k to a nanny and also got some homeoffice help done.  For the simplicity, let's say we only got the nanny work done.   We knew about reporting to the IRS using 1099-NEC for larger than $600 amounts so we reported the $3k as 1099-NEC.  A few days ago, I learned about nanny tax (link above). 

1. Now I want to know what procedure I should follow so I inform the IRS that we are going to do it the right way for the last year so they should use the W2 I will provide and ignore the 1099-NEC?  I am guessing that many must be doing an honest mistake like mine and must have a recourse to correct it...  We understand that we will have to pay 1040-ES each quarter; but we pay those separately for our Schedule C income anyway for the home office.  So, I am not too worried about that; unless I am missing something... 

2. Also, is this something that I am sweating about unnecessarily?  Someone suggested to move to W2 going forward; however, I wonder when year 2022 shows 1099-NEC and the year 2023 shows W2 to the same person, wouldn't that raise a flag?  

Thanks!

[ThomasM125 · Accepted solution]

It would be best to correct the form 1099-NEC and issue the W-2. Whether you would get in trouble by leaving the 1099-NEC alone for 2022 and changing to the W-2 next year is hard to say, but since you reported the income, even though it was on the wrong form, that may work in your favor. However, the penalties for filing a 1099-NEC in place of a W-2 could be substantial, especially given you corrected it next year, which is proof that you were aware that it was reported incorrectly.

Whatever you decide, make sure you correct the 1099-NEC form if you decide to replace it with a W-2, as you don't want the income to be reported twice.

You can use TurboTax QuickEmployer forms to prepare  a W-2 form. To correct your form 1099-NEC you have to secure a blank Form 1099-NEC (you can get one from an office supply store or order from IRS online) and mark the "Corrected Box" on the top of it and enter the amount as $0. Then, file copy A of it with a form 1096 to the address on the Form 1096.