re: How would you handle a nanny from a legal and accounting standpoint

I've had the same full-time nanny for 12 years. I handle all the paperwork myself.

She filled out an I-9 at the beginning and I ran a background/driving check, etc.

I pay her biweekly -- personal check with a pay sheet showing her hours, pay rates (reg/OT/stipends) and withholdings. I wish I could just put her on salary because I pay her for 40 hours every week of the year regardless of whether she works or not (e.g., the 5 months she stayed home when COVID first hit) and she very rarely works OT.

For years, I did the mandatory FICA withholdings only. A while back, she gave me a W-4 and asked me to do the voluntary income tax withholdings (which I'm not required to do as a household employer). I agreed to do the federal withholding (because I can hold the withholding and pay it over with my own income taxes once a year) but not the NC state income tax withholding (because I would have had to start doing quarterly tax payments).

Once a quarter, I have to file a wage report with the state's employment commission and pay the unemployment insurance.

Each January, I file the W-3 and give her her W-2.

All the withheld taxes (FICA and income), plus my half of the FICA, plus federal unemployment tax (100% employer paid), all gets paid in April with our 1040. (I do use an accountant for the 1040, but not specifically because of the household employer schedule.)

I'm a lawyer and had zero desire to end up with any sort of nanny tax/ unemployment issue. My husband says that if anything happens to me, he's not dealing with any of this shite and will pay her cash under the table.

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Do you set up an LLC and pay her through the LLC so she can't sue you individually?

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I did not do this.

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From an accounting standpoint how should this be set up?

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There are several online services that are not as expensive as what my CPA would bill me. I settled on Savvynannypayroll. I like it so far. I set up an EIN before signing up, but they will walk you through it if you haven’t. I don’t think they offer any sort of referral bonus/discount/trial period.

I originally thought I would just turn on the payroll section of Quickbooks, but they actually don’t support the appropriate filing structure (schedule H)

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Should there be a contract in place?

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We do not have one. It would not hurt to draw up an agreement and sign it. We agreed on a salary she’s a 60-something year old lady. She wouldn’t respond particularly well to an enumerated set of expectations. She wouldn’t say “no” to anything asked of her, and she knows we wouldn’t ask her to do anything outlandish or out of her comfort zone. We are very lucky and trusted her relatively early. Several others that were interviewed, I probably would have drawn up some form of expectations. I honestly don’t think we could get as lucky as we have again. I may be proven naïve later for not doing it, but we are happy and a year into it without any problems.

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Any recourse from just paying her cash with no paperwork or LLC in place?

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only if you get caught.

In my reading, I found several opinions suggesting it is pretty well established that nannies are not contract/1099 employees. Both of you would be committing some sort of tax evasion by you not reporting you pay her and her not reporting that you pay her.


Our nanny suggested that most her former clients employed her through their businesses (which, in reading, also seems fairly shady).



Good luck. And also, congratulations for being in the position that this is necessary and an option.

One word of caution - think about what car the nanny is using to drive your kids around and make sure there is liability insurance for an accident. If the nanny is driving your car make sure you understand and address any policy exclusions that could apply for an employee driving your car. If your full time nanny gets into a bad wreck while “on the clock” that is her fault, and she is driving her own car, and all you have is basic car insurance and home owners insurance . . . god speed to you and your assets.

Only you can get yourself comfortable with these scenarios. Most insurance agents and personal injury attorneys are in fact morons. Read your policies. Make sure you are covered.

This thread has made me realize my family isn’t going to have a nanny

Probably about right. A salaried nanny in New Orleans is about $40,000a year.

You can ship in a nanny from a 3rd world country and they will work their arse off. Cooking, cleaning, etc.

There are special programs for this, all legal.

I don't know about all the tax and accounting side of this, but thought I'd mention since nobody has in the replies so far...

Check with your homeowner insurance agent about this too. Many homeowner companies won't insure homes that have full-time residence employees due to the liability concerns with having a full-time employee working at your property all the time. You could get dropped it they found out or have an exclusion that results in a denial of claim if the nanny had an accident at your house. I'm sure that some specialty carriers who cater to very high end clientele would allow it, but most of the carriers that cater to us peasants don't. Just an extra thing for you to check in to.

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And let's not forgot worker's comp.

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Not in Louisiana. Domestic employees are exempt from Workers comp. Other states have a minimum number of employees before a policy is required.

Our household has two attorneys and we

- Went through an agency

- Did not start an LLC

- Use a third party for payroll and taxes

-Have a contract (though it's of minimal value IMO)