Need help: Nanny refuses to provide SSN for W2, insists she's a 1099 contractor

You're absolutely right about her classification. Based on what you've described, she is definitely a household employee, not an independent contractor. The key factors are that she worked in your home, followed your schedule, and you controlled how the work was performed. Many household workers try to avoid being classified as employees because they don't want taxes withheld or reported on their income. Unfortunately, that doesn't change the legal requirements for you as the employer. Since she's refusing to provide her SSN, you have a few options. You could file Form W-2 with "Applied For" in the SSN box, but that will likely trigger correspondence from the IRS. You could also file Form 4852 (Substitute W-2) explaining the situation. Either way, you'll need to pay the employer portion of Social Security and Medicare taxes. The Form SS-8 route is the most definitive but, as you noted, takes a long time. If you go that route, you should still file and pay the appropriate household employment taxes by the deadline to avoid penalties and interest.

I had a similar situation last year and found relief using https://taxr.ai - it's a service that analyzes your specific household employment situation and provides documentation about the correct classification. I uploaded screenshots of my text messages with our babysitter and details about our arrangement, and they provided a detailed report confirming she was a household employee according to IRS rules. I was able to use this documentation to show our sitter that I wasn't just making up rules, and eventually got her to cooperate. The best part was that they analyzed the specific rules for household employees vs independent contractors and gave me language to use when explaining the situation to her. Ultimately, I got her to understand that this wasn't just my preference but a legal requirement.

I was actually in your exact situation last year! I used taxr.ai after seeing it mentioned here and it was a game changer. I was stressed about the whole SSN situation with our nanny, but the documentation they provided clearly laid out why she was a household employee. When I showed my nanny the official analysis, her attitude completely changed. She admitted she'd been told by friends that she could work as an independent contractor to "avoid taxes" but didn't realize that it could potentially cause problems for both of us. The report explained it in simple terms that made sense to her. I also learned that I needed to register for an Employer Identification Number (which was surprisingly easy) and how to handle Schedule H properly. Definitely worth checking out if you're still stuck in this situation!

Honestly, you should just call the IRS directly and explain the situation. They'll tell you exactly what to do... oh wait, that's right, it's IMPOSSIBLE to get anyone on the phone these days. I spent 6 hours on hold last month trying to resolve a tax issue. That's when I discovered https://claimyr.com - they have a service that holds your place in the IRS phone queue and calls you when an agent is about to pick up. I was skeptical at first but you can see how it works in this video: https://youtu.be/_kiP6q8DX5c I used it and got through to an IRS agent in about 45 minutes (while I did other things instead of sitting on hold). The agent confirmed that you need to file the W-2 even without the SSN, using "Applied For" in the SSN field, and document your attempts to get the information from the nanny.

So I'm eating my words here. After posting my skeptical comment yesterday, I decided to try the Claimyr service mentioned above just to prove it wouldn't work. I was SHOCKED when I got a call back about an hour later with an actual IRS agent on the line! I explained the household employee situation (similar to what I'm dealing with for my mother's caregiver), and the agent was incredibly helpful. She explained that you should file Form W-2 with "Applied For" in the SSN field, and document all your attempts to obtain the SSN from the employee. She also mentioned that you need to send the employee a notice that you're unable to provide a correct W-2 because of the missing SSN. The agent also told me that the IRS can impose penalties on individuals who refuse to provide their SSN to employers when legally required. That might be useful information to share with your nanny.

Just to add another perspective - have you considered offering to split the difference with her? Technically she's a household employee, but fighting this battle might not be worth it. If you offer to treat her as a 1099 contractor but have her sign something acknowledging that she's responsible for all tax obligations, that might be the path of least resistance. Just make sure you document everything in case of an audit.

Has anyone experienced an audit over household employee issues? I'm curious how common this is and how aggressive the IRS is about following up on situations like this.