Nanny Pay & Taxes
At The Elite Nanny Team, the parents pay the nanny directly usually using an online direct deposit system, and handle all nanny taxes. We highly recommend HomePay by Breedlove.
Please know that the minimum nanny pay we extend to our nannies on your behalf is $17.00 an hour.
While your nanny may work a consistent shift and his or her pay may not fluctuate greatly, we suggest using a time tracking app.
The number one reason nannies quit is that they feel they are being taken advantage of (regardless of whether it is occurring or not).
The easiest way to eliminate friction is two-step:
First, pay your nanny by the hour and not on a salary.
Second, utilize a time card app your nanny can use to track her hours. Using a time tracking app greatly ensures complete transparency about hours worked and nanny pay.
Many available apps recognize when the employee arrives at the home address (also known as work) and initiates a timestamp. Additionally, your nanny can email you a CSV documenting their hours.
We highly recommend HoursTracker, which is available for free on Android and iPhone. It is our goal to establish a lasting relationship based on trust and open communication.
While we offer suggestions, as the employer all final decisions are yours.
It is our goal to minimize unneeded tensions. Additionally, you are welcome to compensate your household employee in cash, check, or direct deposit.
Wondering what Nanny Services we offer?
How Much Does a Nanny Cost in Minnesota?
Nannies aren't cheap. A nanny will cost as much as they are worth. You are paying for reliability, experience, and convenience.
You are also paying for their extensive childcare knowledge and their passion for providing quality childcare. Every nanny agency is different.
At The Elite Nanny Team, parents currently pay their nanny directly (subject to change) typically using a direct deposit system, but some sitters accept checks.
At our Minneapolis-based nanny agency, the lowest hourly rate we will extend to nannies on our client's behalf is $17.00 an hour.
At $17.00 an hour, fewer of our nannies are college-educated. The higher the hourly nanny pay you offer, the greater the skill and education we can recruit for.
Daycares can be less expensive than using a private nanny. Professional private household help is typically reserved for the well-to-do. Here is an example of the typical cost of employing a nanny as compared to the cost of college according to the College Board:
"The average tuition, fees, room and board adds up to $21,370 at a public four-year school and $48,510 at a private four-year school for the 2018-2019 tax year."
Employing a nanny can range from $35,000 to $60,000 per year. This expense covers all of your children the caregiver is watching.
It is never too early to start searching for the perfect childcare expert. Discover how our placement services will offer you the highest quality of child care imaginable.
Can We Pay the Nanny in Cash?
If you pay your babysitter in cash and his or her total cash earnings exceed $2,100.00 per year then you would submit a Schedule H along with your regular taxes. Schedule H is a line item form indicating when the nanny worked.
However, any small discrepancy in the form can add up to big penalties with the IRS according to CNBC's article "Why That Secret Cash Payment to your Nanny Could Backfire on Your Taxes." Using an accountant can ease the burden of managing household employment taxes, which need to be submitted by April 15th each year the nanny is employed. The easiest solution is to pay your nanny legally using a payroll specialist such as HomePay.
A percentage of childcare is tax-deductible, so long as your children are under 13 years old. (Publication 503) The Dependent Care Tax Credit is available up to a total of $5,000.00.
The IRS defines a Household Employee as follows:
“The worker is your employee if you can control not only what work is done, but how it is done. If the worker is your employee, it doesn't matter whether the work is full time or part time or that you hired the worker through an agency or from a list provided by an agency or association. It also doesn't matter whether you pay the worker on an hourly, daily, or weekly basis, or by the job.” - IRS.gov
Your nanny will need a caregiver’s taxpayer identification number.
As the employer, you are responsible for state and federal nanny taxes. Typically, a W-4 is issued to the nanny. You will be encouraged to follow accurate accounting by deducting taxes from your employee’s pay at the end of each week.
Most of our clients either own their own business so their accountant handles the taxes. Families who don't use an accountant use a payroll system that manages all of the nanny taxes for you (with the exception of fiscal-year-end itemization.)
Because your contract establishes a guaranteed number of hours, this calculation and fee rarely differ from week to week, so if you prefer to manage your private household employee's taxes personally, that is up to you.
Kindly note that the employer is accountable for paying nanny taxes ON BEHALF OF the nanny/babysitter.
Filing nanny taxes is important and will allow you to benefit from the childcare tax deduction.
Which nanny service would best suit your childcare needs?
Filing Nanny Taxes
Here’s the paperwork you’ll need for your employee and the IRS:
• Form W-4: A withholding allowance certificate that you’ll need from your employee if you withhold federal income taxes.
• Schedule H: You’ll turn in this form with your 1040 when you file your taxes. This will spell out how much you paid your employee(s) and the applicable unemployment, Social Security and Medicare taxes paid.
Ordering forms and publications. Go to IRS.gov/Forms to download forms and publications. Otherwise, you can go to IRS.gov/OrderForms to order current- and prior-year tax forms and instructions. Your order should arrive within 10 business days.
About Paid Vacation Days and Other Benefits
Offering employment benefits to your nanny is your decision, as the employer.
You can establish them as the total number of days you will offer if your nanny-employee goes on vacation or becomes sick.
Typically, we suggest that however many paid vacation days you offer the nanny, you use half of the days and schedule them to coincide with your family's vacation.
You leave the remaining vacation days for your nanny to use to schedule her own vacation.
Employers hiring a full-time nanny typically offer between 10 and 30 days paid vacation days plus some paid federal holidays.