I carried my 18-month-old son up the steps to his new daycare, reassuring him that I would be back to pick him up later. As soon as the door opened, he laid his head down on my chest and started sobbing. Immediately, I felt tears well up in my eyes as the daycare owner took him from me, assuring me that he would be fine. I walked away, feeling like a failure as a mother, and spent half of my drive to work crying.
After this experience, I knew there had to be a better childcare option for my kids.
When I returned to work the next time, I decided to hire a nanny. But finding and hiring a nanny wasn’t easy. And learning how to pay a nanny legally, seemed like something only an accountant would be able to figure out.
The good news is I’ve put all of that experience into this post, so you can decide if hiring a nanny is right for you and learn how to hire a nanny legally.
4 Simple Steps to Learn How to Hire a Nanny Legally
Why You Should Hire a Nanny
The big question is why would you hire a nanny and not just take your kids to daycare?
1. Your Schedule
If you work part-time or evenings and weekends, a nanny is a better option than a daycare. You can hire a nanny to work the specific hours that you need her to work.
2. Kids’ Schedules
If you’re really into schedules for your kids and you’re particular about what they eat or when they do certain things, a good nanny is going to work better for you than a daycare. Daycares have a schedule that all of the kids follow, which is great to add some structure to little kids’ lives if you don’t do schedules. Daycare is not so great for the “particular mom.”
I have to admit, I am the “particular mom” as much as try to think I’m not. The daycare’s schedule caused my son to come home hungry and exhausted. I love that my nanny follows the schedules that I’ve created for my kids.
3. Individualized Care
In the U.S., daycares have an adult-to-child ratio for each age group. Here are the ratios from ChildCare.gov:
1 adult to 3-4 infants (under 12 months)
1 adult to 3-6 toddlers (1-2 years)see ChildCare.gov for additional ratios
That means, if you have your baby in daycare, 1 adult is caring for your child alongside 2-3 other infants! Can imagine offering your infant the level of care that you give him/her alongside 3 other infants? I can’t.
A good nanny is going to give your children the same level of individualized attention that you would give them.
Put in the Work Up Front
Now let’s look at how to find, hire, train, and pay a nanny.
Where to Find a Nanny
Start with personal recommendations. Ask others who have used nannies or babysitters for recommendations.
If you can’t find a personal recommendation, try a site like Care.com (the cost is between $13 and $39 a month, depending on the length of your subscription). Be aware that experience and professionalism vary widely on these sites.
A Few Tips to Hire a Nanny
- Start your search EARLY–a few months before you need someone to start.
- Do a background check!
- Find someone who is stable (personally) and has a record of longevity in their previous employment.
- If someone isn’t communicating with you regularly, they probably aren’t going to be reliable.
- Do a phone interview before meeting in person.
- Require at least 1 day of training before you leave this person alone with your kids.
- Install cameras in your house (we use the Wyze cameras).
- Have a backup plan in case the nanny doesn’t work out.
Train your nanny by having her shadow you for at least a day. That way you can show her how you want things done. Make this a requirement.
Have a printed-out schedule and instructions for her (download your free template here) along with any established routines you want her to follow.
Write up a contract. This gives them clear guidance on how things will go and protects you legally if anything were to happen. I’m not an attorney and don’t have easy access to one, so I will refer you to The Fab Working Mom Life for nanny contract information.
*One suggestion I would make is to include a clause about a probationary period where the nanny can be fired without cause immediately.
The Great Nanny Disaster
In between my busy day at work, I found a few chances to pull up the video feed on my phone. As my 2-year-old son jumped and climbed all over his bed, almost 30 minutes past nap time, our new nanny continued to plead, “Do you want to put your pull-up on now?”
I could suddenly see how this would play out long-term. My toddler would run the house, do whatever he wanted with her, and become a monster who would also destroy the small amount of peace that we’d created in our slightly less-than-chaotic home.
I could already tell from that first day, that this nanny was not going to work for us. Add to that the fact that a “family emergency” had kept her from attending training. And the next day? Turns out she had another family emergency. This left us with no one to watch our kids and me in a tough spot with my own new job.
The bottom line: It’s worth taking the time to follow these tips to hire someone reliable who you’ll feel confident leaving your kids with. If someone doesn’t want to follow your rules, they aren’t the nanny for you.
How Much Does it Cost to Hire a Nanny?
You might be thinking, this is all great, but can I afford to hire a nanny? That can get a little convoluted, so let’s look at the cost of hiring a nanny compared to daycare.
The Quick Answer
Daycare cost is per day or half day (if they offer that option).
Nannies are paid by the hour and you’re going to hire someone who will work for the wage that you’ll pay them. We’re looking at paying a nanny legally so I’m going to start around minimum wage.
Personally, I’ve found that offering a higher wage, won’t necessarily get you a better nanny. Now, if you end up with a great nanny, I’d suggest regular raises so you don’t lose her.
|Full-Time||$300 per week||$600 per week (@ $15 per hour)|
|Part-Time||$250 per week||$300 per week (@ $15 per hour, 20 hours per week)|
It looks like nannies are WAY MORE expensive than daycares, but this is where your specific scenario comes into play. Notice how the number is a lot closer when you cut down the hours?
The Long Answer
|2 Children — Infant & Older Toddler||Daycare||Nanny|
|Full-Time||$600 per week (@ $300 a week for each child)||$600 per week (@ $15 per hour)|
|Part-Time||$500 per week (@ $250 a week for each child)||$300 per week (@ $15 per hour, 20 hours per week)|
You can see how things can easily change when you add in additional children. This is where a nanny really starts to make sense.
Example with 4 Children
|4 Children — Infant, toddler, older toddler, & school-aged||Daycare||Nanny|
|Full-Time||$1000 per week||$800 per week (@ $20 per hour)|
|Part-Time||$800 per week||$400 per week (@ $20 per hour, 20 hours per week)|
I gave our (imaginary) nanny a bit of a raise here, since she’s caring for 4 children, and she’s still significantly cheaper than a daycare.
Obviously, this all depends on daycare cost in your area and how much the going rate is for nannies in your area.
What About Hiring a Nanny Legally?
Hiring a nanny legally is going to cost you a little more than paying a nanny under the table. But you will be able to take advantage of some tax credits by doing so.
You Need to Pay Payroll Taxes on Your Nanny If…
- Your nanny lives OR works in your home.
- Your nanny works regularly (not a babysitter who comes once in a while).
- You assign specific job duties to them and control when & how they complete them.
If you answered “yes” to all of these, your nanny is considered a “household” employee in the eyes of the IRS, and you are required to withhold and return certain taxes to the IRS from their paycheck. You are also required to pay certain employment taxes.
- “Taxes paid by the employee: Federal and state income taxes as well as FICA taxes (Social Security and Medicare)
- Taxes paid by the employer: FICA taxes as well as federal and state unemployment insurance” (TurboTax).
How Much Does it Cost to Hire a Nanny Legally?
Let’s look at the additional costs of hiring a nanny legally.
Payroll Company (optional) = $50 per month
A payroll company is going to calculate all of the taxes for you and send them to the right place (more on that in a minute).
Taxes = approx. $300 per month (for full-time)
Social Security @ 6.2% and Medicare @ 1.45%
Federal Unemployment @ .6%
State Unemployment @ 3.4% (rates are different in each state)
Total additional for a full-time nanny = $350 per month
So back to our first example, let’s add in those costs.
Care for 1 Child with Nanny Taxes
|Full-Time||$300 per week||$700 per week (at $15 per hour)|
|Part-Time||$250 per week||$346.95 per week (at $15 per hour, 20 hours per week)|
Care for 4 Children with Nanny Taxes
|4 Children — Infant, toddler, older toddler, school-aged||Daycare||Nanny|
|Full-Time||$1000 per week||$905.20 per week (at $20 per hour)|
|Part-Time||$800 per week||$458.60 per week (at $20 per hour, 20 hours per week)|
Even with these costs, a nanny is cheaper in certain instances.
The Bottom Line: The cost of hiring a nanny makes sense financially if you have more than one child and/or work odd hours or less than full-time.
Make it Easy
In the U.S., if you pay a household employee more than $2,400 in 2022, you are required to pay FICA taxes on them (the taxes outlined above). You are also required to pay into both state and federal unemployment for them.
Paying these taxes can become somewhat complicated. You have to send in the money to the state and IRS agencies by certain set dates.
Use a Payroll Company
I use SurePayroll,* which does all of the tax work for you. They calculate the pay, create a paystub each month and a W2 (both of which you are required to provide), and send all of the right taxes to the right places. As I noted before, it costs $49.99 a month and this was one of the cheapest options I could find for this service. Homepay, which is a payroll company that Care.com offers is $75 a month.
Whether you use a payroll company or brave the tax world yourself, you will need to apply for an EIN. And you may also have to apply for an employer number with your state unemployment agency.
Let’s Save Some Money
Here’s how can you offset some of these costs of paying your nanny legally.
Child Care Tax Credit
This credit gives you a deduction of $3,000 for one child and $6,000 for two or more children on your taxes.
Dependent Care Financial Savings Account (FSA)
This is an account offered through your employer that allows you to set aside a monthly amount, capped at $5,000 per year, tax-free. Each month you will submit a claim with the agency to receive the money you put in back to cover childcare costs. This saves those $5,000 from being taxed by removing that amount from your taxable income.
Check with your employer to see if they offer elective FSA accounts.
*Note: You cannot use the same $5,000 twice. So the money you put into your FSA cannot be deducted for the Child Care Tax Credit on your taxes. But if you’re paying more than $8000 a year for one child and $11,000 for two or more children in childcare costs, you will have paid enough to utilize both.
The Risks of Taking the Easy Road
It seems a lot easier to pay your nanny cash and forget all of these tax laws. And it probably is. However, you will be breaking the law if you do decide to bypass these laws. Watch out for these risks if you do decide to do this.
If you don’t file appropriate taxes for your nanny and the IRS becomes aware of this, this is tax fraud and you will be subject to tax penalties and interest charges.
This could happen if you were audited, if your nanny tries to report the income on her taxes, or if she tries to file for unemployment.
I carefully kissed my each boy goodbye and assured him I’d be home in a little while. I waited for the tears or complaining, but surprisingly, there weren’t any. They were too busy playing with their new nanny. I left, still waiting for the protests. There were none.
As I confidently hand my kids over each day to my nanny, I leave work knowing they are in capable hands. On my drive, my mind shifts from mom tasks to work tasks.
Hiring a nanny can be a headache, but hopefully, this information helps make it a little easier for you. The peace of mind that comes from having a good nanny and not worrying about the IRS looming over you, makes all of the hard work worth it.