Many people have the desire to hire a nanny. That is until they learn more about what this means from a tax perspective. Not only do you have to withhold FICA from your nanny’s paychecks, but you are responsible for paying 7.65% (6.2% for Social Security tax and 1.45% for Medicare tax) as an employer.
This leads to one very important question: can I pay my nanny as a 1099 contractor? This is a common question, as it will make your life much easier from a payment and tax perspective.
Don't Make the Wrong Decision
As easy as it sounds to have your nanny work as a contractor, this isn't something you can do. By incorrectly classifying a nanny as an independent contractor, you will eventually find yourself in trouble with the IRS.
A nanny is an employee, not a contractor, for one very important reason: you have control of how this person spends the day with your child or children. Everything your nanny does is based on your suggestions and how you want your child to be raised. Furthermore, your nanny comes to your home and uses your supplies.
An independent contractor is somebody you hire to perform a service, however, you don't have control over the details of the project. With this arrangement, the person also provides their own supplies and equipment.
This may make it easier to understand. If your nanny was hired as a contractor, this means he or she would make all decisions regarding your child, including but not limited to: what they eat, when they sleep, and what they do while you are away. Is this the type of arrangement you want? Probably not.
It sounds like a great idea to hire a nanny as a 1099 independent contractor instead of an employee. Unfortunately, this is not legally possible as the IRS defines it.