Can you include your nanny on business payroll? Do you want to?

Paychex offers a team of compliance experts and payroll specialists who can provide knowledgeable advice on tax and labor regulations. It is the only provider on this list that also offers consultation service, a dedicated representative, and 24/7 customer and technical support via phone and chat. Paying taxes incorrectly can be flagged as tax fraud, so it’s a good idea to get a nanny payroll service that can perform calculations correctly. According to the IRS, your child’s caregiver is a household employee, which means you’ll have to pay them and file taxes with the IRS and state. Because you’ll be the household employer, your nanny or babysitter will look to you to handle the administrative tasks while they care for your kids. However, managing administrative tasks well requires getting the right tools.

1. SurePayroll is a cloud-based payroll software that can handle the pay processing needs of small businesses, including household employers.
2. NannyChex makes it simple to pay your nanny with no contracts or hidden fees, giving you complete piece of mind when it comes to payroll and taxes.
3. SurePayroll was the first company to bring payroll for small businesses to the internet back in 2000, and the company has continued providing an easy-to-use, flexible, and affordable service ever since.
4. This led the IRS to crack down on nanny tax compliance, along with a number of high-profile incidents.
5. Wave Payroll offers live chat Monday through Friday and email support for your customer service needs.
6. With HomePay, only federal and state taxes are filed, and you need to pay for year-end tax preparation—unlike SurePayroll, which doesn’t charge extra for this.

If you’re caught, you and your nanny could both end up in serious trouble, including being fined, charged with tax fraud, or audited. It might be tempting to keep your payments off the books so you and your nanny both have more money in your pockets, but it’s not a good idea. When you hire a nanny, you become a household employer—this means you may be subject to paying an employment tax. This is often referred to as a “nanny tax,” but that’s just a colloquial term that can apply broadly to housekeepers, elder caregivers, gardeners, etc. If you’re lucky enough to reside in one of Poppins Payroll’s service states, you’ll benefit from a super-easy signup and onboarding process, zero hidden tax-filing fees, and PTO and overtime tracking.

Why Would Your Nanny Want To Be on Payroll?

So, up to four employees, you will pay a flat monthly fee of around $39. However, the app can crash from time to time and many states don’t have full access to all the options of this service. One household employer, however, stated that she has encountered an issue with using the app while she was traveling out of the country. Still, she nanny payroll services said that the company’s customer service took care of everything and handled the problem professionally. If you want to use this service, you’ll be required to cover a monthly fee of around $39.99 per employee. If you have more than one employee, you will have to pay an additional 10$ fee per month for every new person that works for you.

Best Nanny Payroll Services of 2024

With Payroll by Wave you only pay for activated employees, making it perfect for keeping track of seasonal staff, like a summer nanny or holiday babysitter. At Business.org, our research is meant to offer general product and service recommendations. We don’t guarantee that our suggestions will work best for each individual or business, so consider your unique needs when choosing products and services.

The provider processes payroll for any pay schedule and for both hourly and salaried employees. It supports two hourly rates for the same employee, but it doesn’t track staff attendance and PTO accrual balances. However, you can input the applicable sick and vacation pay, including an employee’s actual hours worked, overtime, allowances, and bonus payments, directly into its system for pay processing. The first plan, Paychex Flex Essentials, should have enough basic payroll features to suit most household employers. HomePay will only require your nanny’s email address to set up an online profile in its system.

Additionally, you can mark any report as a favorite for easy access with just a single click in the future. Moreover, you have the option to export the reports to Microsoft Excel or directly print them as needed. It got a 3.62 rating out of 5, with perfect scores in its reporting features. Unlike SurePayroll, however, it does not issue Schedule H, which significantly affected its score. QuickBooks Payroll also offers automated taxes, paycheck and tax calculations, and next-day direct deposit.

Household employment taxes

HomeWork Solutions can help you set up your household employer account with the IRS and relevant state tax authorities. HomePay also offers this service, while Paychex walks you through the process. Generally, the IRS requires you to withhold 6.22% of Social Security and 1.45% of Medicare taxes for all cash wages given to an employee, totaling 7.67% of wages. However, you can decide to pay your nanny’s FICA tax from your own funds—but keep in mind that the IRS also requires you to pay your own share of Social Security and Medicare taxes. Additionally, you may have to pay state taxes, so check your state’s regulations for guidelines. Keep in mind that UKG Pro doesn’t provide its prices on its website.

You might also consider choosing a nanny tax service that works directly with your employees to set up their time tracking and payroll software. We found that SurePayroll offers all the features that household employers need to manage nanny payroll. It has the expertise of working with small businesses but has a special program specifically for nannies and other household employees.

SurePayroll Cons

In other words, the IRS doesn’t take these matters lightly, so if you’re required to pay nanny taxes, just do it. It will involve a little extra effort, not to mention money, but it’s a better idea than skirting the law and dealing with what could be far worse repercussions. Let’s say you let go of the nanny you employed for years once your children are older and in school. Your nanny might try filing for unemployment benefits, at which point your name will be listed as his or her former employer. If a government agency investigates and discovers you haven’t been paying taxes, you could wind up in hot water. Additionally, if you pay your nanny $1,000 or more in any calendar quarter, you’re also required to pay federal unemployment tax equal to 6% of your nanny’s wages.

Note that you are not required to withhold your nanny’s federal income tax or state income tax, though your household worker can directly requests that you do so. The IRS also lists some exceptions to nanny taxes, so before you start filing FICA, FUTA, and nanny taxes, give their list a read-through. But if you’re wondering why it’s so cheap, well, NannyPay calculates taxes for you, but it can’t file them on your behalf. NannyPay will tell you how much to pay your employee, but it doesn’t include the same direct deposit features as SurePayroll, Paychex, and Nanny Chex. Some people try to bypass the “nanny tax” by paying their nanny under the table, but this is illegal and risky.

Finding a new or different payroll service provider involves a lot of comparing and contrasting. If you want to ensure nanny payroll is processed on time, every time, SurePayroll can automate payroll for you. This means nanny paychecks will go out without you having to remember or take any action. For $49.99 https://adprun.net/ per month for one employee (plus $10 per additional), get two-day direct deposit, unlimited payroll runs, PTO and sick time tracking, auto payroll and tax filing. All the platform’s users have full access to all the features of Sure Payroll, without any pricing tiers or limits for household payroll.

It will also calculate and withhold applicable taxes or payments that need to be made for each pay period. However, unlike the other nanny payroll services on our list, HomePay handles federal and state taxes only. The company’s payroll software has a personal, customizable dashboard and other great benefits. You can, for example, run payroll in a few quick steps and access manager and employee self-service tools through its user-friendly mobile app. Additionally, certified payroll professionals are available 24/7 to answer any payroll or employment tax questions.

If you employ a nanny, the IRS considers you a household employer, which means you’re responsible for withholding key payroll taxes from your nanny’s paycheck. You must also pay employer-only taxes, such as the employer portion of Medicare and Social Security taxes, plus federal and state unemployment taxes. However, since Paychex Flex is tailored toward small-business payroll (rather than specific to household employers), its interface will have a steep learning curve for most parents. Much like ADP, it also has far more tools than most household employers need, especially those who have one part-time worker rather than a fleet of home employees.