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nelsonpanderson
New Member

Hi, I will be paying a nanny to watch my son. I know she will be filing a 1099 next year. What do I need to do?

 
1 Best answer

Accepted Solutions
Opus 17
Level 15

Hi, I will be paying a nanny to watch my son. I know she will be filing a 1099 next year. What do I need to do?

If the person is providing child care services in their own home (they are an independent care provider) then you are not responsible for their tax situation.  Pay in cash or check, it doesn't matter, but get receipts either way.  You will need their tax number (social security number or federal EIN) to claim child care credits on your tax return.  You don't issue a 1099-MISC to them for the money you pay them.

If the person is providing care in your home exclusively to your family (which the word nanny makes me think) then they are probably your employee.  You are required to pay them the agreed wage. You don't have to withhold income tax but you do have to collect and pay household employment tax, which is the same function as social security and medicare tax in a regular job.  Household employee tax goes on your tax return with your other taxes and credits.  You also have to give them a W-2 at the end of the year, and you need their SSN in order to file that W-2 with the social security administration.  

See here for more https://www.irs.gov/publications/p926/ar02.html

*Answers are correct to the best of my ability at the time of posting but do not constitute legal or tax advice.*

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6 Replies
SweetieJean
Level 15

Hi, I will be paying a nanny to watch my son. I know she will be filing a 1099 next year. What do I need to do?

Will she be coming to your home?
nelsonpanderson
New Member

Hi, I will be paying a nanny to watch my son. I know she will be filing a 1099 next year. What do I need to do?

Yes
nelsonpanderson
New Member

Hi, I will be paying a nanny to watch my son. I know she will be filing a 1099 next year. What do I need to do?

She is providing care in my home 3 days a week, occasionally there will be other kids there too. She also works with other families in their homes and my son will not be in her care at that time.
Opus 17
Level 15

Hi, I will be paying a nanny to watch my son. I know she will be filing a 1099 next year. What do I need to do?

The IRS says
"You have a household employee if you hired someone to do household work and that worker is your employee. The worker is your employee if you can control not only what work is done, but how it is done. If the worker is your employee, it doesn't matter whether the work is full time or part time or that you hired the worker through an agency or from a list provided by an agency or association. It also doesn't matter whether you pay the worker on an hourly, daily, or weekly basis, or by the job"

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A nanny web site says this:

The IRS uses a 20-point test to determine which party within the work relationship has the most control. An independent contractor classification is appropriate only when the worker is clearly in control, where she provides her own tools, sets her own hours, determines how the work will be performed, offers services to the general public, the term of the engagement is finite and generally short-term, she is free to engage help or hire someone to take her place, etc. Based on the answers to the IRS test for independent contractors, tax law appears to view most nannies as employees rather than independent contractors. Tax laws vary by country, so seek appropriate, professional advise from counsel in your country.  See this site <a rel="nofollow" target="_blank" href="http://www.greataupair.com/nanny_taxes.cfm">http://www.greataupair.com/nanny_taxes.cfm</a>
See also this site <a rel="nofollow" target="_blank" href="https://www.homeworksolutions.com/knowledge-center/my-nanny-wants-to-be-treated-as-an-independent-co...>
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If you control this person's employment in your home, then they are your employee for the 3 days a week they are in your home.  You can pay them an hourly wage or a salary, although be careful of overtime laws and minimum wage laws.  If you don't control the person's employment (they can send in a substitute without your permission, they can change their hours, they can care for other kids) then they might be an independent contractor.  But do you really want to hire a nanny in your home who can bring in other kids without your permission and who could hire a sub without your permission or notifying you?

If they are your employee and you allow them to babysit other people's kids in your home, then you are taking on some serious liability issues.  If one of those kids gets injured in her care and she is your employee, you are ultimately responsible.  Even if they are not your employee, you may have significant exposure to liability if something goes wrong in your home.  Have a talk with your homeowner's insurance provider.

If you and the nanny agree that they will be treated as an independent contractor, then you just pay them and get a receipt. They are responsible for their tax returns.  Get their SSN or tax ID number so you can claim the child care credit or use an FSA to pay your expenses.

But realize that if the person becomes unhappy, they can file actions against you with the state and with the IRS for back wages, tax issues, overtime, and so forth (by claiming they were an employee and you cheated them of income and benefits).  If the facts and circumstances show they were an employee all along, you would have no legal defense and it could be quite costly.
*Answers are correct to the best of my ability at the time of posting but do not constitute legal or tax advice.*
Opus 17
Level 15

Hi, I will be paying a nanny to watch my son. I know she will be filing a 1099 next year. What do I need to do?

If the person is providing child care services in their own home (they are an independent care provider) then you are not responsible for their tax situation.  Pay in cash or check, it doesn't matter, but get receipts either way.  You will need their tax number (social security number or federal EIN) to claim child care credits on your tax return.  You don't issue a 1099-MISC to them for the money you pay them.

If the person is providing care in your home exclusively to your family (which the word nanny makes me think) then they are probably your employee.  You are required to pay them the agreed wage. You don't have to withhold income tax but you do have to collect and pay household employment tax, which is the same function as social security and medicare tax in a regular job.  Household employee tax goes on your tax return with your other taxes and credits.  You also have to give them a W-2 at the end of the year, and you need their SSN in order to file that W-2 with the social security administration.  

See here for more https://www.irs.gov/publications/p926/ar02.html

*Answers are correct to the best of my ability at the time of posting but do not constitute legal or tax advice.*
TaxGuyBill
Level 9

Hi, I will be paying a nanny to watch my son. I know she will be filing a 1099 next year. What do I need to do?

It is also likely your State will have requirements for the Household Employee, such as State Unemployment Insurance and Worker's Compensation Insurance.
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