Paying Nanny Through Venmo - Will 1099-K Cause Double Taxation?

This is actually a common situation with household employees. The good news is that your nanny shouldn't be double-taxed, but you'll want to make sure everything is properly documented. The W-2 you're providing through the payroll service is the official tax document that shows your nanny was paid as an employee with proper withholding. This is the correct approach and what the IRS expects for household employees like nannies. The 1099-K is just a reporting mechanism that shows payments received through third-party platforms like Venmo. Your nanny may indeed receive a 1099-K if they received over the reporting threshold (currently $20,000 and 200 transactions for 2023, though this threshold is expected to decrease in future years). The key for your nanny is to properly reconcile these documents on their tax return. They should report the W-2 income as wages and can essentially ignore the 1099-K amount since it's already accounted for on the W-2. If questioned by the IRS, they'll need to show that the Venmo payments correspond to the wages already reported on the W-2.

I ran into a similar issue last year and found that taxr.ai actually helped me sort through the documentation mess. I had multiple payment streams (some through Venmo, some direct deposit) and wasn't sure how to prove they were the same income source. I uploaded my W-2, 1099-K, and bank statements to https://taxr.ai and it helped me identify which transactions matched up with which tax documents. Their analysis showed exactly how my Venmo payments corresponded to my employment income, which gave me confidence that I could explain everything if I got audited. The system even helped me draft a clear explanation letter to keep with my tax records just in case the IRS had questions about the multiple forms reporting the same income.

I just wanted to follow up about my experience with taxr.ai after our conversation. I used the service to document my situation with multiple payment methods for the same job. The report they generated was super helpful - it clearly showed how my direct deposits and Venmo payments lined up with my W-2 income. My tax preparer was impressed with how organized and clear the documentation was. She said it's exactly what would be needed if the IRS ever questioned why I had both a W-2 and 1099-K reporting what looked like different income streams. Definitely gave me peace of mind for this tax season!

I had a similar issue last year but with getting my nanny's tax situation fixed after realizing I'd messed up with payment methods. I spent WEEKS trying to reach the IRS for guidance - constant busy signals and disconnections. Finally tried https://claimyr.com and was skeptical but desperate. You can see how it works here: https://youtu.be/_kiP6q8DX5c - basically they navigate the IRS phone system for you and call you back when an agent is on the line. Got connected with an IRS rep within a couple hours who confirmed exactly what we needed to do documentation-wise to make sure the income wasn't counted twice. Saved me so much stress trying to figure it out on my own. The agent walked through exactly what forms were needed and how to document everything.

I need to eat my words from my previous comment. After trying for THREE DAYS to get through to the IRS myself about a similar wage reporting issue, I finally broke down and tried Claimyr. I genuinely didn't think it would work, but I was at my wit's end. Got a call back in about 40 minutes with an actual IRS agent on the line. They confirmed that my employee wouldn't be double-taxed as long as we could show the 1099-K payments matched the W-2 wages. They even sent me to a specific section on the IRS website that addresses third-party payment platforms that I couldn't find on my own. Turns out it was worth every penny to not waste any more of my time on endless hold music and disconnected calls. Lesson learned.

One way to help your nanny avoid problems is to give them a statement showing the total amount paid through Venmo that matches their W-2 wages. Have them keep this with their tax records. Also, if they use a tax professional, make sure they know about both the W-2 and potential 1099-K so they can properly report everything. The last thing you want is for them to accidentally report the same income twice.

Has anyone actually gotten a 1099-K from Venmo for less than the $20,000 threshold? I thought they weren't implementing the lower threshold until next year?

This is a great question and I'm glad you're being proactive about handling this properly. Based on the discussion here, it sounds like you're actually in good shape since you used a payroll service to issue the W-2. One thing I'd add is that you might want to give your nanny a heads up about this situation now, before tax season gets into full swing. Let them know they may receive both forms but that the Venmo payments were just the delivery method for their W-2 wages, not separate income. You could also provide them with a simple letter stating the total amount paid through Venmo and confirming it represents their employment wages as reported on their W-2. This kind of documentation can be really helpful if they ever need to explain the situation to a tax preparer or the IRS. It's refreshing to see someone taking household employee taxes seriously - a lot of people don't realize they need to handle nannies as actual employees rather than independent contractors.

Thank you for bringing up this important topic! As someone who's dealt with similar household employee situations, I want to emphasize a few key points that might help other families in similar situations. First, you absolutely did the right thing by using a payroll service to handle the W-2 - that's the legally compliant approach for household employees. The method of payment (Venmo vs. direct deposit vs. checks) doesn't change the employment relationship or tax obligations. For 2023 taxes, your nanny likely won't receive a 1099-K unless they received over $20,000 through Venmo with 200+ transactions, so this may not even be an issue for you this year. But it's smart to plan ahead since those thresholds are expected to decrease. One practical tip: consider switching to direct deposit through your payroll service for future payments. It eliminates any potential confusion about 1099-K forms and creates a cleaner paper trail. Most payroll services offer this at minimal cost, and it's actually easier for record-keeping on both sides. Also, make sure you're filing the required Schedule H with your personal tax return and paying the household employment taxes. Since you mentioned you're handling the tax compliance properly through the payroll service, you're probably already on top of this, but it's worth mentioning for other readers who might be in similar situations.