The nanny I’m hiring claims she often accepts cash payments. That’s alright, I answered, as long as I receive invoices to deduct the cost of childcare from my taxes. She concurs. However, after checking online, I see that most nannies get paid in this manner and that I must handle withholding, fica, etc. as I am her employer officially.
Should I pay her the same as I would a housekeeper or gardener?
To find out what your state’s and the federal government’s standards are for independent contractors’ employment status, do a Google search. ICs are not subject to guidance or control, and they choose their schedule and compensation. You are unlikely to be appropriately categorized as an independent contractor.
Hello @Beau, please take note of the following important points.
As the employer of a nanny, you are responsible for withholding and paying Social Security and Medicare taxes (FICA), as well as federal and state unemployment insurance. This is different from hiring a housekeeper or gardener, who might be considered independent contractors and not subject to the same tax requirements.
The “nanny tax” refers to the combination of federal and state taxes that families must pay when they hire a household employee like a nanny. This includes both the employee’s and employer’s portions of FICA taxes.
While paying in cash is common, it is crucial to maintain proper records and issue pay stubs or invoices to ensure you can claim the appropriate tax deductions.