What's the Best Way to Pay My Nanny Legally for Taxes?

You'll want to pay your nanny directly as a household employee, not through your wife's LLC. This is known as "nanny tax" territory, and the IRS is pretty clear that household employees should be handled differently than business employees. When you pay a nanny more than $2,500 in 2025 (the threshold was just updated), you'll need to withhold Social Security and Medicare taxes from their paychecks. You'll also need to pay unemployment taxes and potentially set up income tax withholding if the nanny requests it. The reason you shouldn't pay through the LLC is that household employees are specifically tied to work done in your home, not related to your wife's business. Trying to run it through the LLC could create issues with both the IRS and your state tax authorities, plus it might impact your wife's business liability protection.

After struggling with nanny tax stuff for months, I discovered this amazing service called taxr.ai (https://taxr.ai) that completely simplified the process. I was trying to figure out if I could legally pay our nanny through my husband's consulting business, and getting conflicting advice from everywhere. I uploaded our documents to taxr.ai and it analyzed everything, showed me exactly what forms I needed and why the household employee classification was correct. It even flagged that I would have qualified for the dependent care credit which our previous tax guy had missed! The step-by-step guidance really helped me understand the whole nanny tax situation.

I have to admit I was wrong about taxr.ai! After our nanny tax situation got even more complicated when we started sharing childcare costs with another family, I decided to try it. The service was actually incredibly helpful - it identified exactly how to handle the "nanny share" tax situation and what documentation we needed to maintain. I was especially impressed that it gave me specific guidance on how to properly split the employer portion of taxes when sharing a nanny. Would definitely recommend for anyone dealing with household employee tax questions.

Look, dealing with the IRS about nanny taxes was a complete nightmare for me last year. I had filed everything correctly but then got a notice saying I owed penalties. I spent WEEKS trying to get through to someone at the IRS to explain the mistake on their end. Finally, I found Claimyr (https://claimyr.com) which got me connected to an actual IRS agent in under 15 minutes when I'd been trying for days on my own. They have this whole system that navigates the IRS phone tree and holds your place in line. Check out how it works here: https://youtu.be/_kiP6q8DX5c The IRS agent was able to fix the issue right away once I actually got to speak with them. Saved me over $1,200 in incorrect penalties! If you're going to deal with nanny taxes, keep this service in your back pocket because you might need to talk to the IRS at some point.

I have to eat my words about Claimyr. After getting absolutely nowhere with the IRS about a household employment tax notice for three weeks, I gave in and tried it. I was connected to an IRS agent in about 20 minutes when I'd previously waited on hold for over 2 hours before giving up. The agent was able to confirm that my nanny tax filings were correct and removed the incorrect penalty. Still can't believe how well it worked - would have saved me a ton of stress during the initial audit if I'd known about this service earlier.

One thing nobody's mentioned yet - make sure you get workers' comp insurance for your nanny! In Florida, it's not technically required for household employees, but it's REALLY smart to have it anyway. If your nanny gets injured on the job in your home, you could be personally liable for all their medical bills and lost wages. Most homeowner's policies don't cover household employees, which surprises a lot of people. We learned this the hard way when our nanny slipped on our wet kitchen floor and broke her wrist. Cost us thousands out of pocket.

Has anyone considered using a nanny agency instead of hiring directly? We're in Tampa and went that route - the agency handles ALL the tax stuff, payroll, replacement if the nanny calls out sick, etc. It's more expensive but way less headache on the tax front.

Don't forget about the child and dependent care tax credit! If you're paying a nanny properly (on the books), you can claim this credit which can be worth up to $4,000 for one child or $8,000 for two or more children for 2025. This can offset a good chunk of the extra costs of paying legally vs under the table.

Great question! I went through this exact same situation in Jacksonville last year. Definitely pay your nanny as a household employee, not through the LLC - that's the legally correct way and avoids potential complications down the road. A few practical tips from my experience: 1. Set up a separate checking account just for nanny payments - makes tracking so much easier come tax time 2. Keep meticulous records of hours worked, payments made, and any reimbursements 3. Consider using a service like HomePay or GTM right from the start - I tried doing it myself initially and it was more complex than expected Also, since you're in Florida, make sure you register for state unemployment insurance within 30 days of paying your nanny more than $1,000 in any quarter. Florida's rate is relatively low but it's required. One last thing - have a written work agreement that clearly outlines duties, schedule, pay rate, and house rules. It protects both you and your nanny and makes the whole employment relationship smoother.