First-Time Nanny Employer Checklist: Everything You Need to Do

You found a great nanny. The kids love them. Start date is set.

Now someone tells you about "nanny taxes" and suddenly you're staring at a wall of IRS publications wondering what you've gotten into.

Take a breath. This checklist covers everything, in order, with no jargon. You've got this.

Before Their First Day

1. Determine if you'll cross the threshold

The IRS says you're a household employer when you pay a single worker $3,000 or more in a calendar year (2026 threshold).

Quick math: if your nanny works 10+ hours per week at $15+/hour, you'll cross $3,000 within a few months. Most families with a regular nanny hit the threshold—so plan on it.

Not sure? Use our nanny tax calculator with your specific numbers.

2. Get an EIN from the IRS

An Employer Identification Number is free and takes about 5 minutes online. You'll need it for everything—tax filings, W-2s, state registration.

Apply at irs.gov/ein. Our step-by-step EIN guide walks through every screen.

Tip: When asked "type of entity," select "Household Employer." When asked the reason, choose "Hired a household employee."

3. Have your nanny complete these forms

You must complete the I-9 within 3 business days of their start date. Keep it on file—don't send it to anyone.

4. Register with your state

Most states require household employers to register for a state unemployment insurance account, and some require additional registrations (disability insurance, paid family leave, workers' comp).

Find your state's requirements →

This is the step that takes the longest—some states make you mail in paper forms. Start early.

5. Set up a payroll system

You need a way to track hours, calculate taxes, generate pay stubs, and keep records. Your options:

We're biased, but NannyKeeper handles everything most families need at a fraction of the cost of full-service providers.

Try NannyKeeper free →

Each Pay Period

Now the setup is done. Here's what happens on an ongoing basis.

6. Track hours worked

Keep a log of hours for each pay period. This doesn't need to be fancy—a shared notes app, a simple timesheet, or NannyKeeper's built-in tracking all work.

Important for overtime: Federal law requires time-and-a-half for hours over 40 per week. Some states have stricter overtime rules. Track hours carefully. (Live-in nannies have different overtime rules.)

7. Calculate and withhold taxes

Each paycheck, you need to:

• Calculate gross pay (hours x rate, plus overtime if applicable)
• Withhold employee Social Security (6.2%) and Medicare (1.45%)
• Withhold federal income tax (based on their W-4)
• Withhold state income tax (if your state requires it)
• Record the employer share you owe (matching 6.2% Social Security + 1.45% Medicare)

A payroll service does all of this math for you. If you're doing it by hand, read our employer tax breakdown for the full details.

8. Pay your nanny and give them a pay stub

Pay by check, direct deposit, or bank transfer—and always provide a pay stub showing gross pay, deductions, and net pay.

Never pay cash without a record. You both need documentation for tax time. If you want to set up direct deposit, see our direct deposit guide. Already paying through Venmo or Zelle? Read what you still need to do.

Every Quarter

9. Make estimated tax payments

Four times a year, you need to pay the IRS (and usually your state) for the taxes you've been withholding and the employer share you owe.

Option: Instead of quarterly payments, you can increase your own income tax withholding at your job to cover the household employment taxes. Many families find this easier. Adjust your W-4 at work to withhold an extra amount each paycheck.

See our quarterly tax deadline guide for details.

At Year-End

10. Give your nanny a W-2 by January 31

You must provide your nanny with a W-2 form showing total wages and taxes withheld for the year. The deadline is January 31 of the following year.

You also need to send Copy A to the Social Security Administration by the same date. Our W-2 guide covers the process.

11. File Schedule H with your tax return by April 15

Schedule H is the form where you report household employment taxes. It gets filed with your personal Form 1040. Our Schedule H guide walks through it line by line.

Common First-Timer Mistakes

We see these constantly. Avoid them and you'll be ahead of 90% of household employers.

Mistake #1: Waiting until year-end to deal with taxes

Taxes are owed throughout the year, not just at filing time. If you wait until January to figure out what you owe, you'll face underpayment penalties. Start withholding from day one.

Mistake #2: Paying cash with no records

Even if your nanny prefers cash, you need to track every payment. No records = no way to prove you paid the taxes you owe. Always give a pay stub.

Mistake #3: Calling your nanny a contractor

Your nanny is almost certainly an employee under IRS rules. Issuing a 1099 instead of a W-2 can result in back taxes, penalties, and interest—for both of you. Read our employee vs. contractor guide if you're not sure.

Mistake #4: Forgetting about state taxes

Federal taxes are just part of the picture. Most states require unemployment insurance registration, and many require state income tax withholding. Check your state →

Mistake #5: Not discussing taxes with your nanny upfront

Be transparent from the start. Explain that you'll be withholding taxes from their pay and that this is a legal requirement. Most nannies appreciate legal pay once they understand the benefits (Social Security credits, unemployment eligibility, mortgage qualification). Read more about why W-2s matter for nannies.

For more pitfalls, see our 5 nanny payroll mistakes guide.

Your First-Month Timeline

Here's a realistic timeline if you're starting today:

That's it. The first week has the most work. After that, it's 10–15 minutes per pay period.

What It Actually Costs You

Beyond your nanny's wages, here's what to budget for employer taxes:

These are rough estimates—your actual cost depends on your state's unemployment rate. Use our calculator for exact numbers.

And don't forget: you may be able to offset some of this with the Child and Dependent Care Tax Credit, which can save you up to $2,100 per year.

FAQ

How soon after hiring do I need to start withholding taxes?

From the very first paycheck. Don't wait until you've crossed the $3,000 threshold—if you know you'll cross it, start withholding immediately. It's much easier to withhold as you go than to sort it out later.

What if my nanny asks to be paid "off the books"?

Explain that paying legally benefits both of you. They build Social Security credits, qualify for unemployment benefits, and can verify income for loans or apartments. You avoid IRS penalties and protect yourself legally. It's non-negotiable from a legal standpoint.

Do I need to provide benefits like health insurance?

No. Household employers are not required to provide health insurance, retirement benefits, or paid time off under federal law. However, some states require paid sick leave, and offering reasonable benefits helps attract and retain good nannies.

What if I use a nanny share with another family?

Nanny shares add complexity—each family is a separate employer. Read our nanny share tax guide for the full breakdown.

Can NannyKeeper help with all of this?

Yes. NannyKeeper handles payroll calculations, tax withholding, pay stubs, W-2 generation, and Schedule H preparation—starting at $10/month. You can even start tracking for free before you commit to a paid plan.