Why Nannies are Not 1099 Contractors
If you’re thinking of hiring a nanny to care for your kiddos, you might be wondering how the actual hiring works. You’re not a business owner, so they’re not an employee, right? Aren’t nannies considered independent contractors?
While it’s a common belief that nannies are just paid like contractors, the truth is they are, in most cases, considered household employees by the government. Yes, even part-time nannies! This is important for both you and your nanny to know since it impacts your taxes, but don’t worry. We break down all the details about it below.
When is a nanny considered an employee?
“Can’t I just pay my nanny and have them pay taxes?” This is a common question we get at A Perfect Fit, and the answer is usually no. Here’s why:
Your nanny is considered a household employee when you control the work they do, and also how they do it. When you hire a nanny, you are setting their hours, requesting certain help (i.e. grocery shopping, transportation, tutoring, etc.), and expecting them to take care of your children to your standards. All of that is great, but it’s also what is expected of an employee.
Think of it this way: Plumbers, HVAC repairmen, electricians, and other people you hire for their work are considered independent contractors. You hire them for their services, but you don’t have any say over when they arrive, how many hours they work, or what exactly they’ll do.
The only time this may not be true is if you have a temporary nanny or occasional child care provider. However, if you pay them wages of $2,200 or more for 2020 (this amount can change from year to year), then you’ll also need to pay them as an employee!
What if I’m unsure about my nanny’s work status?
If you’re still unsure whether your nanny meets the requirements to be considered a household employee, you or your nanny can fill out and turn in a Form SS-8 to the IRS. This form helps you determine your nanny’s status through a series of questions.
However, you may not want to wait that long for the IRS to get back to you. If you pay your nanny makes at least $2,200 annually for hours worked and you control and direct their role, it’s pretty safe to say that they’re your employee.
Does my nanny get a W-2 or 1099 form?
As your employee, your nanny gets a W-2 form so they can file their tax return. Independent contractors get a 1099 form for their taxes. Both report income a person earns throughout the tax year, but they differ in tax withholdings and the information each form shows.
For your own taxes, you should also complete a Schedule H form, aka Form 1040 or 1040-SR, which outlines the wages you paid your nanny and any other household employee over the year.
What happens if I make a mistake?
If you mistakenly classified your nanny as an independent contractor and gave them a 1099 form, you’ll need to issue them a W-2, as well as pay them back for taxes they paid on your behalf.
Giving them the wrong form and classifying them incorrectly is considered tax evasion from the IRS’s point of view. You might need to pay additional fines for the mistake, too.
Why it matters that you pay nannies as an employee
Unfortunately, many nannies and other household employees are classified wrongly or even kept “off the books” to avoid paying taxes. That may mean they’re being paid below minimum wage and missing out on benefits from their employer.
When you classify your nanny as an employee, you pay them fairly and legally. This also gives nannies verifiable income to be used as a reference when buying a car, renting an apartment, or opening a new credit line. Plus, you might qualify for tax breaks, so it’s in your best interest to hire your nanny the right way.
Hire a nanny with A Perfect Fit
Still unsure about the legalities of hiring a nanny? We can help! The team at A Perfect Fit has over a decade of experience in the nanny industry. We’ve helped countless families in Phoenix, Dallas, Denver, and Miami find the best nanny for their kids. We also partner with an amazing payroll company that does all the work for you, so you don’t have to worry about employment taxes or making mistakes!
With our experience, commitment, and passion for child care, we’re here to answer all the questions you may have about finding the perfect nanny for your family. Choose your city and contact A Perfect Fit today to begin your search!