Hiring a nanny legally - do we have to withhold her 7.65% FICA taxes?

Title: Hiring a nanny legally - do we have to withhold her 7.65% FICA taxes? 1 I'm in the process of hiring a nanny for our kids and trying to do everything by the book. Several candidates asked if we could pay under the table, but we want to follow the law properly. We found a great nanny who initially agreed to legal employment, but now she's asking us not to withhold anything from her paycheck - including FICA taxes. I thought employers were legally required to withhold the employee's 7.65% Social Security and Medicare contributions from their paychecks, and then we as employers would match that amount? Can someone clarify if we absolutely must withhold her portion of FICA or if there's some loophole I'm not aware of? I don't want to start this relationship off on the wrong foot, but also don't want to get in trouble with the IRS.

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18 comments

Paige Cantoni

•8M

5 You're absolutely right - when you hire a household employee like a nanny, you're required to handle FICA taxes properly. The 7.65% FICA is actually split into two parts: 6.2% for Social Security and 1.45% for Medicare. As the employer, you MUST withhold the employee's 7.65% from their paycheck AND you must also pay your matching 7.65% employer portion. The nanny might be asking this because she wants her full gross salary without deductions, but unfortunately that's not legal. You can't just agree not to withhold these taxes - it's not optional. If you're paying her more than $2,600 in 2025, she's considered a household employee and you become what's known as a "household employer" with specific tax obligations.

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Paige Cantoni

•8M

5 You're asking about the risks of not complying with tax law, which can be significant. If you don't withhold and pay these taxes, you could face penalties, interest on unpaid taxes, and potentially even criminal charges for tax evasion in extreme cases. The IRS has been cracking down on household employment tax compliance in recent years. If your nanny later files for unemployment, social security benefits, or if there's any dispute that leads to investigation, you could be discovered. Many families get caught when their nanny leaves and files for unemployment, but can't claim benefits because the employer never reported their wages.

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Paige Cantoni

•8M

9 I went through this exact same situation last year! My nanny also asked for no withholding and I was confused about what to do. I found this service called taxr.ai (https://taxr.ai) that really helped me understand all my obligations as a household employer. I uploaded our draft employment agreement and it analyzed everything, highlighting the FICA withholding requirements and explaining what would happen if we didn't comply. The service actually created a simple explanation document that I could share with my nanny that helped her understand why the withholding was necessary and how it actually benefits her long-term by contributing to her future Social Security benefits. It made a potentially awkward conversation much easier!

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Paige Cantoni

•8M

9 The service is really straightforward - you can upload any tax-related documents or just type in your question, and it analyzes everything and provides detailed guidance specific to your situation. It goes well beyond what you'd find in a generic Google search because it's analyzing your specific circumstances. For the payroll calculations, it doesn't replace payroll software, but it explains exactly what you need to calculate and when, plus it provides templates you can use. I found it particularly helpful for understanding the Schedule H requirements for household employers.

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Paige Cantoni

•8M

17 Just wanted to follow up - I tried taxr.ai after seeing it mentioned here, and it was incredibly helpful! I was confused about so many aspects of being a household employer, and the service walked me through everything step by step. I uploaded our offer letter and some questions I had about FICA withholding, and it gave me crystal clear answers with citations to specific IRS publications. The best part was that it generated a complete "Household Employee Tax Guide" customized to our situation that I've been using as a reference for all the deadlines and requirements. Definitely worth checking out if you're navigating nanny taxes for the first time!

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Paige Cantoni

•8M

12 If you're having trouble communicating with your nanny about tax requirements, you might want to try getting direct confirmation from the IRS. I was in the same position and spent HOURS trying to get someone on the phone at the IRS to confirm what I needed to do. Finally found Claimyr (https://claimyr.com) which got me connected to an actual IRS representative in about 20 minutes. They have a demo video showing how it works: https://youtu.be/_kiP6q8DX5c - basically they navigate the IRS phone system for you and call you when they reach a human. I was able to get official confirmation about the FICA withholding requirements directly from the IRS, which made it much easier to explain to my nanny why this wasn't negotiable.

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Paige Cantoni

•8M

12 It's not about skipping the line - they use technology to navigate the phone system and wait on hold for you. When a human IRS agent finally answers, they connect you to the call. You don't have to listen to the hold music or keep your phone tied up for hours. They basically have systems that can stay on hold with multiple IRS lines simultaneously and recognize when a human answers. I was skeptical too until I tried it. The whole point is you don't have to waste your day listening to hold music and can just get a call when someone is actually available to help.

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Paige Cantoni

•8M

21 I need to eat my words and apologize. After dismissing Claimyr as a probable scam, I decided to try it myself when I couldn't get through to the IRS about a household employment question. I was shocked when they called me back in about 35 minutes saying they had an IRS agent on the line. The agent confirmed everything others have said here - as a household employer, you MUST withhold the employee's 7.65% FICA contribution, there are no exceptions or workarounds. The agent also mentioned that failing to do so is one of the most common audit triggers for household employers. Saved me hours of frustration and got me an authoritative answer directly from the source.

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Paige Cantoni

•8M

3 Here's what I did when hiring our nanny: I calculated what her take-home pay would be after the 7.65% FICA withholding, then worked backward to set a gross pay rate that would give her the net amount she wanted. For example, if she wanted $20/hour take-home, I set her official rate at $21.65/hour so that after the 7.65% withholding she'd get her $20. This approach satisfied everyone - she got the amount she wanted in her pocket, and we handled the taxes legally. Just make sure you're clear in your employment agreement about the official gross rate vs. the expected net pay.

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Paige Cantoni

•8M

3 For income tax withholding, that's actually optional for household employees - unlike FICA which is mandatory. I gave our nanny the choice, and she preferred to handle her income taxes herself through quarterly estimated payments. If your nanny wants income tax withheld too, you'd need to have her complete a W-4 form and then calculate the additional withholding amount based on the IRS withholding tables. It adds more complexity, but some employees prefer it so they don't face a big tax bill when filing.

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Paige Cantoni

•8M

19 Don't forget about state-level requirements too! Depending on where you live, you might also need to withhold for state unemployment insurance. In my state, I had to register as a household employer with both the IRS (for federal taxes) AND with the state workforce agency. The whole nanny tax thing is honestly a paperwork nightmare. I eventually broke down and hired a nanny payroll service that handles all the withholding, tax payments, and filings for about $50/month. Totally worth it to avoid the headache and potential mistakes.

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