Filing taxes as a nanny when being paid under the table - how to report cash income?

You can absolutely report your income even if your employers don't want to. The IRS actually expects this for all income, including cash payments. 1. You'll report this income as self-employment income on Schedule C. Since you don't have a 1099, you'll need to keep your own records - track all payments in a notebook or spreadsheet with dates and amounts. You'll pay both income tax and self-employment tax (which covers Social Security and Medicare) on this income. 2. You don't have to include the family's information on your personal tax return. Your Schedule C just requires you to list the type of business ("Childcare provider" or "Nanny services") and the total income. The IRS won't know specifically who paid you based on your tax return. Just be aware that self-employment tax is about 15.3% on top of regular income tax, since you're covering both the employee and employer portions of Social Security and Medicare. Setting aside about 25-30% of your income for taxes is a good rule of thumb.

After reading through your situation, I wanted to share my experience. I was in a similar position last year with a family not wanting to do things officially. I found this service called taxr.ai (https://taxr.ai) that was super helpful for navigating self-employed household employee situations. I uploaded my payment records and answered some questions, and they explained exactly how to report my income correctly. They even gave me a letter I could show apartment managers as proof of income that looked way more professional than my handwritten payment log. It made dealing with the whole cash income situation so much less stressful!

Just wanted to update - I tried taxr.ai after seeing the recommendation here. It was seriously exactly what I needed! They helped me set up a proper payment tracking system that my nanny family actually agreed to sign off on monthly, even though they're still paying me in cash. The income verification letter they created got accepted by my apartment complex without any issues. I was also completely clueless about quarterly estimated tax payments before, but now I have them all scheduled with calendar reminders. Definitely worth checking out if you're in this situation!

I had to deal with all this nanny tax drama last year too. After 3 months of trying to get through to the IRS with questions about household employee classification (kept getting disconnected after waiting FOREVER), I finally tried Claimyr (https://claimyr.com) which someone mentioned in another tax group. You can see how it works here: https://youtu.be/_kiP6q8DX5c but basically they got me through to an actual IRS person in about 20 minutes instead of the 3+ hours I was waiting before. The agent walked me through exactly what forms I needed and confirmed I didn't have to report my employer's info if I filed as self-employed. Such a relief to get official answers!

I was completely wrong about Claimyr. After my skeptical comment, I decided to try it anyway because I was desperate to ask about my situation similar to the OP's. Got a call back in 45 minutes and talked to an actual IRS person who confirmed I could file Schedule C without mentioning my employer's information. The agent even told me about Form 8919 as an alternative if I wanted to report being misclassified without doing Schedule C, but warned it would require employer information. Having official confirmation from the IRS gave me so much peace of mind about my approach. Sometimes being wrong feels pretty good!

Just a heads up that while you can file without mentioning the family on your tax forms, there are some potential downsides to using Schedule C instead of being properly classified as a household employee: - You'll pay more in taxes (the full 15.3% for Social Security/Medicare) - You won't get unemployment benefits if they let you go - No workers' comp if you're injured on the job - No overtime protections Might be worth having a conversation with the family about proper classification. Sometimes they just don't understand their obligations rather than actively trying to avoid taxes. Maybe explain the benefits to them too (childcare tax credits, dependent care FSA).

Just a warning from someone who's been through this - if the family is adamant about not reporting and you do report the income as self-employment, make sure your reported income matches your bank deposits. Don't deposit all the cash you receive if you're reporting it all, or report only what you deposit. The IRS can see bank deposits and flag mismatches. My friend got audited this way and had to explain where all their money came from. Super stressful.

This is such a common situation and it's great that you're thinking about doing things properly! I went through something similar last year and found that keeping meticulous records was key - I created a simple spreadsheet tracking every payment with date, amount, and hours worked. One thing I'd add to the great advice already given: consider having a gentle conversation with the family about the benefits of proper classification. Many families don't realize they can claim the Child and Dependent Care Credit (up to $3,000 for one child) if they report your wages properly. Sometimes when they see the tax benefits they get, they're more willing to do things legally. Also, if you do end up filing Schedule C, remember you can deduct work-related expenses like mileage for taking kids to activities, supplies you buy for crafts/activities, and even a portion of your phone bill if you use it for work communication. These deductions can help offset some of that higher self-employment tax burden. Good luck with the new position - it sounds like a great opportunity!

I'm dealing with a very similar situation right now! Just wanted to add that if you do end up reporting this as self-employment income on Schedule C, make sure you understand the quarterly estimated tax payment schedule. The IRS expects you to pay taxes throughout the year, not just at filing time. The due dates are usually April 15th, June 15th, September 15th, and January 15th of the following year. Since you're starting next month, you'll want to calculate what you owe for the second quarter and get that payment in by June 15th. I use Form 1040ES to calculate my quarterly payments - it's basically a worksheet that helps you estimate your annual income and figure out how much to pay each quarter. The general rule is to pay 25% of your expected annual tax liability each quarter, but there are safe harbor provisions if your income varies. One thing that caught me off guard was that you need to pay both income tax AND self-employment tax in your quarterly payments. The self-employment tax alone is 15.3% of your net earnings, so don't forget to factor that in when setting aside money from each payment. Good luck with the new position - having steady income is so important for things like apartment applications!