Nanny payroll compliance is the set of legal duties you take on when you employ a nanny: withholding and paying Social Security and Medicare, federal and state unemployment tax, filing a W-2 and Schedule H, completing Form I-9, and meeting your state's registration and insurance rules. A payroll service can do much of that work for you, but the IRS is clear that the legal responsibility stays with you. This checklist lists every duty, which ones a service can take on, and which ones stay yours no matter who you hire.
Who is responsible when you use a payroll service?
You are. The IRS says so in the household employer's guide, in plain words:
"You remain responsible if the third party fails to perform any required action."
IRS Publication 926, Outsourcing payroll duties
The IRS's page on outsourcing payroll duties goes further: the employer is ultimately responsible for depositing and paying federal employment taxes, and if a provider fails to pay, the IRS may assess penalties and interest on the employer's account. So the useful question when you compare services isn't "will they handle compliance for me?" It's "which jobs will they do, and how will I know they did them?"
The household employer compliance checklist
This is every recurring duty a family with a nanny usually has. The middle column is what a payroll service can take on; the last column is what stays with you either way.
| Duty | Can a service do the work? | What stays with you |
|---|---|---|
| Social Security and Medicare withholding | Yes: calculating it on every paycheck | Paying it, directly or through the service |
| Federal income tax withholding (optional) | Yes: calculating it from your nanny's W-4 | Agreeing to it with your nanny |
| Federal unemployment tax (FUTA) | Yes: calculating it | Paying it from your own funds |
| Schedule H | Yes: preparing the figures | Filing it with your own Form 1040 |
| W-2 and W-3 | Yes: preparing the forms, and some providers file them | Making sure they reach your nanny and the SSA on time |
| State unemployment tax | Yes: calculating it and preparing state reports | Registering with the state, and the account itself |
| State income tax withholding | Yes: where your state requires or allows it | Registering if your state requires it |
| Workers' compensation insurance | Rarely; it's a separate insurance policy | Buying it where your state requires it |
| Form I-9 | No; you examine your nanny's documents | Completing it and keeping it |
| New-hire reporting | Sometimes | Checking whether your state requires it |
Each of these is covered in more detail below.
Federal taxes: Social Security, Medicare and FUTA
Social Security and Medicare apply once you pay one employee $3,000 or more in cash wages in 2026. You withhold your nanny's share from each paycheck and pay a matching share yourself. Federal unemployment tax applies once you pay $1,000 or more in cash wages to household employees in any calendar quarter of this year or last year, and it's never withheld from the paycheck. Our guide to withholding taxes from your nanny's pay goes line by line through what comes out and what doesn't.
Unless you choose to include them on the Form 941, 944 or 943 and Form 940 you already file for business employees, report Social Security, Medicare, federal unemployment and any income tax you withheld on Schedule H with your own Form 1040. Because it's part of your personal return, Schedule H is your filing even when someone else prepares it. You can pay through the year with estimated tax payments or by asking your own employer to withhold more, so April doesn't bring one large bill. The Schedule H guide walks through the form.
W-2 and W-3
If you paid your nanny $3,000 or more in 2026 or withheld income tax, give your nanny a W-2 and send Copy A with Form W-3 to the Social Security Administration by February 1, 2027. The deadline falls on February 1 this cycle because January 31, 2027 is a Sunday. The W-2 guide for household employees covers each box.
State taxes, registration and insurance
The IRS's advice here is short: contact your state's unemployment tax agency to find out whether you owe state unemployment tax, and check whether you need to carry workers' compensation insurance or pay other state employment taxes. The answers really do differ by state: thresholds for state unemployment tax vary, and several states have paid family leave or disability programs with their own contributions. Your state's page in our state guides lists what applies where you live, and our workers' compensation guide covers the insurance side.
Registration is where families most often assume a service has them covered. Some providers help with it, but the state account is in your name, and a missed registration is your problem to fix.
Form I-9
For a nanny who works for you regularly, you generally must complete Form I-9, which means looking at your nanny's identity and work-authorization documents yourself. USCIS makes an exception for work that is sporadic, irregular or intermittent, and for a worker employed by a domestic service company or an agency that employs temporary domestic workers, rather than by you. You keep it; you don't send it to the IRS or to USCIS. A payroll service can remind you, but it can't do this one for you.
New-hire reporting
Federal law requires employers to report a new hire to their state within 20 days, and some states require it sooner, but each state runs its own program, including whether household employers report. Check your state's new-hire page, which you can find through the federal list of state new-hire programs. We haven't found a federal rule that settles it for household employers one way or the other, so this is one to confirm with your state rather than assume.
Questions to ask any nanny payroll service
These are the questions that separate one kind of service from another. None of them is a trick; a good provider answers each one in a sentence.
- Who files each form? Ask about the W-2, W-3, Schedule H figures and each state report separately. Some providers file and pay for you; others prepare everything and you submit.
- Who moves the tax money? If the service debits your account and pays the IRS and your state, ask how you'll see each payment confirmed. If you pay, ask what reminders you get and when.
- What happens if they miss something? Since you remain responsible, ask whether they cover penalties caused by their own errors, and in writing.
- Do they register you with your state? And if not, do they tell you exactly where to register and what to have ready?
- How do they handle the $3,000 threshold? A service that waits until your nanny crosses it can leave you with a large catch-up in the paycheck where it happens.
- Can you see the numbers? You should be able to see every paycheck's withholding and every tax amount without calling anyone.
- What does the whole year cost? Include per-paycheck fees, year-end form fees and direct deposit fees. Our nanny payroll cost breakdown shows the ranges.
When you're ready to compare specific providers, our roundup of nanny payroll services sets them side by side.
Where NannyKeeper fits
NannyKeeper does not file forms or pay taxes for you. It calculates every amount, prepares your W-2, W-3 and Schedule H figures, reminds you of each deadline and tells you where to file and pay; you submit. That's a deliberate choice: you stay in control of your own tax accounts, and it's part of why software like NannyKeeper usually costs less than a full-service provider that files and pays for you.
If you would rather hand off the filing and the payments entirely, a full-service provider is the better fit, and the checklist above still applies. If you're comfortable pressing submit once the numbers are ready, NannyKeeper does the calculating, tracking and preparing. You can run your own numbers first in the nanny tax calculator.
See what you'll owe
Use our free calculator to estimate your nanny tax costs for 2026.
FAQ
Does a nanny payroll service make me compliant?
It can do most of the work, but it doesn't take over the legal responsibility. The IRS says you remain responsible if the third party fails to perform any required action, so it's worth knowing which jobs your service does and checking that each one happened.
Do I need an EIN to use a payroll service?
You need an EIN as a household employer to file your W-2s, and most services ask for it. You don't need one to start paying your nanny, and NannyKeeper lets you run payroll while your EIN is pending. Our EIN guide explains how to get one.
Can a payroll service complete Form I-9 for me?
Not really. The I-9 needs you to examine your nanny's documents, and you keep the form yourself. A service can remind you to do it.
Is a payroll service worth it for one nanny?
For most families it is, because the calculations, the $3,000 threshold, state rules and year-end forms take more time than they look like they will, and a mistake costs more than a year of software. Whether you want full service or software you file with is the bigger choice.
What should I keep after the year ends?
Keep your payroll records, copies of each W-2 and W-3, Schedule H, proof of your tax payments and the I-9. Pub 926 asks household employers to keep employment tax records for at least four years.
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