The Payroll Blog

News, tips, and advice for small business owners

Master the ABC’s of Household Payroll Before Hiring a Summer or Return-to-Office Nanny

Posted On
6/29/2021
By
Karen Stoychoff

While the kids gear up to frolic in the pool, catch bugs in a jar, climb trees and more, many parents are packing their briefcase or lunch bucket to head back to the workplace after contributing remotely during the pandemic. But what to do with the kids? Hiring a nanny for the summer and beyond is one solution parents may find simplifies their transition back to work. 

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A recent survey of human resources leaders’ and return-to-the-workplace decision makers indicates most companies plan to adopt a home / office, or hybrid mix. While the opportunity to work from home two or three days per week will help somewhat with childcare, there are still days where parents need another option. And even parents who continue to work from home may decide to hire a nanny so they can focus on job responsibilities rather than toggling between job and childcare. 

Hiring a nanny requires more research and planning than a casual babysitter. And whether you decide to hire a live-in or live-out nanny, you will need to determine pay and job duties, and have a plan for how to process household payroll and ensure nanny tax compliance.

SurePayroll offers the following tips to help wade through the hiring process and ensure you understand your responsibilities as a household employer:

  • Appropriate Pay Rate. It’s vital to know how much to pay a nanny before you begin your hiring process. The national average nanny pay rate is roughly $26 per hour, depending on geography, number and age of children, and additional responsibilities, such as school and activity transportation, meal preparation, tutoring and more.
  • Job Classification. It’s important to classify a nanny as an independent contractor or consider a nanny as self-employed. It is improper to issue a Form 1099 to a nanny who earns $2,300 or more in 2021. Failure to properly classify a household employee can lead to serious tax consequences, including tax evasion charges and penalties that could exceed $25,000.
  • Online Payroll System. A household employer is responsible for managing payroll, including withholding taxes. Therefore, paying a nanny “under the table” is not a viable option. That’s why many families who hire a nanny opt to use a payroll service for household employees that calculates and pays the necessary taxes and files the appropriate deductions for Social Security, Medicare, unemployment, and state taxes. SurePayroll’s Household and Nanny Payroll Service also files a 1040-ES on your behalf and provides a signature-ready Schedule H provided for you to attach to your annual 1040 filing.
  • Homeowners Insurance. One thing many families forget to do is contact their homeowner’s insurance company to ensure the policy will cover property damage, personal liability, and potential injuries. It is possible you will have to update your policy or add insurance riders to cover a household employee.

If you are thinking about hiring a nanny this summer, or already have one on your “payroll,” check out SurePayroll’s Nanny Payroll Guide for more household payroll and tax information, plus learn more about the household payroll service named "the best" six years running by Business News Daily & Business.org, and The Best Nanny Payroll Software of 2021 by Digital.com.

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This website contains articles posted for informational and educational value. SurePayroll is not responsible for information contained within any of these materials. Any opinions expressed within materials are not necessarily the opinion of, or supported by, SurePayroll. The information in these materials should not be considered legal or accounting advice, and it should not substitute for legal, accounting, and other professional advice where the facts and circumstances warrant. If you require legal or accounting advice or need other professional assistance, you should always consult your licensed attorney, accountant or other tax professional to discuss your particular facts, circumstances and business needs.