How to Pay Your Nanny Legally in 2026

You decided to pay your nanny on the books. That's the right call, and it is not as complicated as it sounds.

Here's exactly how to do it, from your very first step to the W-2 you'll hand over in January.

Step 1: Get an EIN

An EIN (Employer Identification Number) is the first thing you need. It's the tax ID you'll use on every employment form: W-2s, Schedule H, quarterly deposits, all of it.

The good news: it's free and takes about 5 minutes on the IRS website. You don't need an accountant, a lawyer, or anything other than your Social Security number.

See our step-by-step EIN guide for the exact clicks, or go directly to irs.gov/ein and select "Hired household employees" when asked why you need one. You'll get your EIN immediately on screen.

Step 2: Have Your Nanny Fill Out a W-4

Before the first paycheck, your nanny needs to complete a federal W-4 form. This tells you how much federal income tax to withhold from their pay.

A few things to know:

• The W-4 is your nanny's form to fill out, not yours
• Keep the signed copy in your records, and you don't send it to the IRS
• Some states have their own withholding form too (check your state's requirements)
• Your nanny might claim "exempt" if they expect to owe no federal income tax, which is valid. Just keep it on file

You'll also need them to complete an I-9 to verify their right to work in the U.S. That one's required by federal law too.

Step 3: Figure Out What You Owe

This is the part that looks scary but follows a simple formula. As a household employer, you're responsible for two types of taxes.

FICA (Social Security and Medicare)

FICA is split evenly between you and your nanny:

So on a $1,000 paycheck, you pay an extra $76.50 out of pocket, and you withhold $76.50 from your nanny's pay. The IRS collects a combined $153.

FUTA (Federal Unemployment Tax)

FUTA is 0.6% on the first $7,000 of wages per employee per year, so a maximum of $42/year. This one's entirely on you. Nothing gets withheld from your nanny's pay.

State Unemployment (SUTA)

Every state has its own unemployment tax for household employers. Rates vary, but most fall between 1–4% on the first $7,000–$40,000 of wages. Check your state to find your rate and wage base.

Use our calculator to see your exact numbers based on your nanny's salary and your state:

Step 4: Set Up a Pay Schedule

Pick a schedule and stick to it. Biweekly (every two weeks) is most common for nannies.

Each payday, you'll track three numbers:

1. Gross pay: what you agreed to pay before taxes
2. Withholdings: the 7.65% FICA you deduct from your nanny's check, plus any federal/state income tax withholding
3. Net pay: what actually hits their bank account

A quick example for a $1,000 gross paycheck:

You can track this in a spreadsheet, or let a payroll service do it automatically.

One note: if you promised your nanny a specific take-home amount ("$800 a week, no matter what"), you'll need to gross up their pay so the withholdings work out. This is called a "net pay arrangement" and the math is a little more involved, and our calculator handles it.

Step 5: Plan for the Tax During the Year

Household employment tax is reported annually on Schedule H. During the year, many families increase withholding from their own paycheck. Form 1040-ES applies when you withhold federal income tax from household wages or would otherwise need estimated payments; hiring a nanny alone does not create a universal quarterly deposit requirement. State unemployment and withholding schedules are separate.

Federal: 1040-ES with Schedule H

For household employers, federal taxes work differently than for business employers. If Form 1040-ES applies, use its return-wide calculation, not household payroll alone, to decide whether and how much to pay. Household FICA, withheld federal income tax, and FUTA ultimately flow through Schedule H with your personal return.

The 2026 quarterly deadlines:

If your Form 1040-ES calculation calls for a payment, use IRS Direct Pay (free, no enrollment needed). Click "Pay individual tax," select "Form 1040-ES" and "Estimated Tax," and enter your SSN (not your EIN, since household taxes are part of your personal 1040). You can also pay by credit card at Pay1040.com or ACI Payments (processing fee applies), or mail a check with your Form 1040-ES voucher.

State Unemployment (SUTA)

Most states require quarterly SUTA deposits, paid through your state's labor department portal. A few states fold it into your personal estimated payments. Check your state for the specifics.

Missing a payment during the year does not trigger the late-filing or late-payment penalties, as long as you file your 1040 and pay its balance on time. What it can trigger is the underpayment of estimated tax penalty, which the IRS builds from the published quarterly interest rates rather than a flat monthly percentage. The section on what this costs, further down, has the numbers.

Step 6: File Year-End Forms

Once the calendar year wraps up, two things need to happen before Tax Day.

W-2: Due January 31 or the Next Business Day

You're required to give your nanny a W-2 showing their total wages and withholdings for the year. You also send a copy to the Social Security Administration.

Deadline: February 1, 2027 for both the employee copy and the SSA filing (January 31 is a Sunday).

Our W-2 guide for household employers walks through every box.

Schedule H: Due April 15

Schedule H is a one-page form you attach to your personal tax return (Form 1040). It's where you report all your household employment taxes for the year and pay any remaining balance.

Deadline: April 15 (when your 1040 is due, or October 15 if you file an extension, but taxes are still owed by April 15 even if you extend).

Read our Schedule H guide if you want to understand exactly what goes in each line.

What It Costs If You Get This Wrong

Four things can go wrong here, and they carry different penalties. Families usually worry about the first one and forget the last.

The W-2 Is the One That Costs Twice

A W-2 is two filings wearing one name. It is an information return you send to the Social Security Administration, and it is a payee statement you hand to your nanny. The IRS charges for each of those separately, which is the part almost nobody expects. Its own instructions say so directly:

"This penalty is an additional penalty and is applied in the same manner, and with the same amounts, as in Failure to file correct information returns by the due date."

IRS, General Instructions for Forms W-2 and W-3 (2026)

Wages you pay during 2026 produce a W-2 due February 1, 2027, and these are the amounts for that filing:

Each row is two charges of $60, $130, $340 or at least $690 per copy.

So the real price of never getting around to the W-2 is $680, not $340. Catch it inside the first 30 days and the same mistake costs $120.

Two things worth knowing before you quote any of these numbers. The amounts are keyed to the year the return is due, and they step up most years, so check the edition that covers your filing rather than reusing this table later. And "at least" on the last row is doing real work: for intentional disregard the law sets the penalty at that floor or 10% of the wages the form should have reported, whichever is greater, so on a nanny paid $40,000 that row is $4,000 for the missing SSA copy and another $4,000 for the missing nanny copy, not $690. It is the one line in this table with no ceiling.

Paying Nothing During the Year Is a Different Penalty

If you file your 1040 on time and pay the Schedule H balance along with it, you have not failed to pay anything. Household employment tax is settled on your personal return, so filing and paying that return on time settles it.

What you may owe instead is the underpayment of estimated tax penalty. The IRS calculates that one from the amount of the underpayment, the period it went underpaid, and the published quarterly interest rates for underpayments. It behaves like interest on the amount you were short, for as long as you were short.

Filing or Paying Late Is the Expensive One

Household employment tax rides on your personal return, so a late 1040 is a late Schedule H.

• Failure to file is 5% of the tax due for each month or part of a month the return is late, capped at 25%. If the return is more than 60 days late, the minimum is the lesser of $525 (for returns due after December 31, 2025) or 100% of the underpayment. The "lesser of" matters: on a small household balance, 100% of the underpayment is often well under $525.
• Failure to pay is 0.5% of the unpaid tax for each month or part of a month, also capped at 25%.
• When both land in the same month, failure to file drops to 4.5%, so the pair costs 5% that month rather than 5.5%.

The Easy Way

If manually tracking pay periods, calculating withholdings, remembering quarterly deadlines, and generating W-2s sounds like a lot... it kind of is. That's what NannyKeeper handles.

For $10/month, NannyKeeper calculates every paycheck automatically, tracks quarterly taxes, sends deadline reminders, and generates your W-2 and Schedule H when January comes. You just review and submit.

It's not a hard sell. Some families genuinely prefer to run the spreadsheet themselves, and that works fine. But if you'd rather spend that time on something else, we've got it.

FAQ

Can I just pay my nanny in cash?

You can pay in cash, and that's legal. But "cash" is the payment method, not an exemption from taxes. You still owe FICA, FUTA, and SUTA on those wages, and your nanny still needs a W-2 at year-end. A paper trail (bank transfers, checks) makes everything easier to document. Read more about the risks of paying informally in our under-the-table guide.

What if I've already been paying without withholding taxes?

You can get compliant going forward, and you have options for prior years too. Some families simply start fresh from today. Others work with a CPA to file late Schedule H returns and request penalty abatement. Our guide to catching up on back nanny taxes covers both paths.

Do I need workers' compensation insurance?

It depends on your state. Several states, including California and New York, require household employers to carry workers' comp regardless of how much they pay. Others only require it above a certain wage level. Check your state's page for the rule where you live.

Is my nanny an employee or an independent contractor?

Almost always an employee. The IRS looks at who controls how, when, and where the work gets done. If your nanny works in your home, on your schedule, caring for your kids, that's an employment relationship. You can't issue a 1099 and call it done. Read our employee vs. contractor guide for the full breakdown.

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Related reading:

• How to Get an EIN for Household Employment
• W-2 Guide for Household Employers
• How to File Schedule H