What would the IRS flag about how you've been paying your nanny?

Arizona exempts wages paid for domestic service in a private home from state income tax withholding. Household employers don't withhold AZ state income tax from their nanny's paycheck, though the nanny remains responsible for any income tax they owe at year-end. Employer-side SUI (state unemployment) is still required.

State unemployment insurance (SUI). Arizona requires household employers to register and pay state unemployment tax once wages cross its applicable threshold. New York and DC use $500 per quarter; many states use $1,000. New-employer rate range in Arizona: 0.08% - 20.3%. Missing the registration is one of the most common audit findings — the simulator flags it when your quarterly wages cross the applicable threshold.

No state income tax withholding. Arizona does tax individual income, but it exempts wages for domestic service in a private home from withholding, so there's nothing to deduct from your nanny's paycheck on the state side. Your nanny still reports those wages on their own Arizona return. You owe the federal baseline (FICA, FUTA, Schedule H) and any SUI obligation.

Minimum wage. The minimum wage in Arizona is $15.15/hour. If you paid below this rate, the simulator surfaces it as a Department of Labor exposure — separate from tax findings, and often more expensive (back wages plus liquidated damages).

Run the audit above to see exactly which Arizona rules apply to your situation — each finding comes with dollar exposure and a concrete next step.