Last reviewed: September 4, 2026
If you hire a nanny to work in your home and control both what work is done and how it is done, the worker may be your household employee. Before the first payroll, verify classification, employment authorization procedures, wage-and-hour rules, federal and state tax duties, insurance, recordkeeping, and required notices. Do not assume that paying through an app or issuing a 1099 changes the legal relationship.
This article is a general source map, not tax, payroll, immigration, or legal advice. Current-year thresholds and state/local rules require individual verification.
Classification comes before forms
IRS Publication 926 says a household worker is generally an employee when the household can control not only what work is done but how it is done. A nanny working to the family’s instructions, schedule, and household routines may fit that description even if employed part time or hired from a referral list.
Different laws can apply different tests. The Department of Labor cautions that a label, contract, or 1099 does not by itself make a worker an independent contractor under the Fair Labor Standards Act. Get qualified advice if classification is unclear.
Practical component: the household-employer setup path
| Stage | Questions | Official starting point | Complete by |
|---|---|---|---|
| 1. Define/classify | Who controls schedule and methods? Who is the employer if an agency is involved? | IRS Pub. 926; DOL guidance | Before offer |
| 2. Confirm employment terms | Wage, hours, overtime, duties, time off, expenses, records | DOL and state labor agency | Before first day |
| 3. Complete hiring process | Form I-9, required state forms/notices, screening compliance | USCIS; state agencies; FTC | Required legal timing |
| 4. Set up payroll | EIN, withholding decisions, FICA/FUTA/state questions, pay statements | IRS Pub. 926; state tax/unemployment agencies | Before first payroll |
| 5. Maintain records | Hours, wages, taxes, reimbursements, leave, agreement changes | DOL/IRS/state rules | Every pay period |
| 6. Year-end/end of job | W-2/W-3, Schedule H where applicable, state filings, final pay | Current IRS/state instructions | Current deadlines |
Do not put an employee’s Social Security number in a general household planner.
Wage, hours, and overtime
The Department of Labor explains that domestic service workers, including nannies, are generally covered by the FLSA’s minimum-wage and overtime protections unless a specific exemption applies. Time a nanny must remain on duty and available can be compensable even if the child is sleeping. Live-in arrangements and casual babysitting can involve different rules.
State or local minimum wage, overtime, meal/rest, paid leave, scheduling, pay-statement, and domestic-worker protections may be more specific or protective. Track actual hours and obtain local guidance before agreeing to flat weekly pay that ignores overtime.
Form I-9 and employment authorization
USCIS administers Form I-9. Employers generally must complete and retain the current form for new employees, following the required timing and document rules. The employee chooses from the acceptable documents; the employer should not require a particular document or discriminate based on citizenship, immigration status, or national origin.
IRS Publication 926 tells household employers to keep the completed I-9 available for authorized inspection rather than submitting it to the IRS or USCIS in the ordinary course. Check I-9 Central for the current edition and instructions.
Federal tax setup
Publication 926 contains the current tax-year thresholds and explains when Social Security, Medicare, federal unemployment, and federal income-tax withholding may apply. The amounts can change by year. Use the current publication for the year wages are paid.
The IRS checklist includes:
- determining whether federal and state employment taxes apply;
- obtaining an employer identification number when required;
- deciding how employment taxes will be paid;
- keeping wage and tax records;
- providing and filing Forms W-2 and W-3 when required; and
- filing Schedule H with the household employer’s return when applicable.
Federal income-tax withholding is generally not mandatory for a household employee, but an employee may request it and the employer may agree, following current forms and rules. Do not confuse that with mandatory employee Social Security and Medicare withholding when thresholds apply.
State and local duties
Publication 926 directs household employers to contact the state unemployment tax agency and check other state obligations. Depending on the jurisdiction, those may include unemployment registration, workers’ compensation, disability or paid-leave programs, wage notices, pay frequency, domestic-worker bills of rights, and final-pay rules.
Use the actual work location. A household moving or employing someone across state lines should get tailored guidance.
If an agency is involved
Ask in writing:
- Is the agency the employer, a joint employer, or a referral service?
- Who controls schedule, duties, supervision, and discipline?
- Who pays wages and employment taxes?
- Who provides workers’ compensation or other required coverage?
- Who handles substitute care, complaints, and termination?
- What fees does the household pay, and what happens if the placement ends?
An agency invoice alone does not answer every employment question.
Build the all-in cost
Compare more than the wage. Include employer payroll taxes where applicable, payroll-service fees, paid time off or guaranteed hours under the agreement or law, overtime, mileage or expense reimbursement, backup care, required insurance, and recruiting costs.
Keep the wage and employer-side costs separate in the budget. This makes future rate changes and tax-year updates easier to apply.
Frequently asked questions
Can I treat a nanny as an independent contractor if both sides agree?
A written label does not control classification. Apply the relevant federal and state tests to the actual relationship.
Do I need an EIN for one nanny?
IRS Publication 926 explains when and how a household employer uses an EIN. Check the current publication and IRS EIN process; do not put your Social Security number on employee forms where an EIN is required.
Is an occasional babysitter the same as a regular nanny?
The FLSA and tax rules can treat casual or young babysitters differently from regular domestic employment. Verify the actual frequency, worker, duties, and current rules.
Can a payroll service make me compliant automatically?
A service can perform tasks, but the household remains responsible for choosing an appropriate provider, supplying correct facts, and meeting obligations the contract does not cover.
Official sources
- IRS Publication 926: Household Employer’s Tax Guide
- U.S. Department of Labor: Domestic service fact sheets
- U.S. Department of Labor: Hours worked in domestic service
- USCIS: Form I-9
Continue planning with Morrow Mama
Related guides: nanny work agreement, background-check plan, and daycare versus nanny cost comparison.
The Morrow Mama Childcare & Return-to-Work Toolkit can organize your care comparison and source list, but it does not calculate payroll or determine employment status. Use current official and professional guidance.