busy working mother with her baby in hand

For many professionals with young children, the shift back to in-office work—whether full-time or hybrid—presents new challenges in securing reliable child care. With the recent 2025 mandate for federal employees to return to work, families must now decide: enroll their child in daycare or hire an in-home caregiver like a nanny. While each option has its benefits, many parents are turning to nannies for the personalized care, schedule flexibility, and one-on-one attention they provide.

However, employing a nanny comes with financial and legal responsibilities, particularly when it comes to payroll and taxes. If you’re considering hiring a nanny, it’s crucial to do so legally by properly handling payroll taxes.

Why Pay Your Nanny Legally?

While it may be tempting to pay a nanny “under the table,” doing so comes with risks that can outweigh any short-term convenience. Here’s why paying legally is the best choice, and really the only feasible choice for federal employees:

1. Tax Compliance Protects You and Your Nanny

As a household employer, you are required by the IRS to withhold and pay employment taxes if you pay your nanny $2,800 or more in 2025. This includes:

  • Social Security and Medicare taxes (FICA)
  • Federal and state unemployment taxes
  • Any required state payroll taxes

Paying legally ensures compliance with tax laws and prevents potential audits, penalties, and fines.

2. Legal Pay Provides Your Nanny with Job Benefits

When paid legally, your nanny benefits from:

  • Social Security and Medicare credits that contribute to their future retirement and healthcare
  • Unemployment benefits if they lose their job
  • Verifiable income, which is crucial for securing loans, renting apartments, buying or leasing a car, or applying for health insurance

3. Avoid Costly Legal and Financial Consequences

Employers who pay under the table risk fines, back taxes, and even potential legal action. High-profile cases have shown that government employees are particularly at risk if they ignore the nanny tax laws.

For example, Zoë Baird, President Clinton’s nominee for U.S. Attorney General in 1993, saw her appointment derailed due to what became known as the “Nannygate” scandal. It was revealed that Baird had hired undocumented workers as household employees and failed to pay their required payroll taxes. The controversy led to her withdrawing from consideration, proving that failing to follow nanny tax laws can have severe professional and legal consequences.

Similarly, others—including former Treasury Secretary Timothy Geithner—have faced scrutiny for failing to properly report household employee wages. These cases serve as cautionary tales that paying household workers off the books can lead to serious repercussions.

How NannyPay Makes Paying Legally Easy

Many families worry that handling nanny payroll is complicated, but with NannyPay, the process is simple and stress-free. Our DIY online payroll software calculates payroll taxes for you, making compliance with federal and state regulations easier.

With NannyPay, you can:

  • Accurately calculate payroll taxes for your nanny or other household employee
  • Print payroll checks or track electronic payments
  • Generate W-2 forms for tax season
  • Automatically prepare Schedule H for your tax return

Make the Right Choice for Your Family and Your Nanny

As professionals adjust to returning to the office, securing reliable child care is a top priority. If hiring a nanny is the best choice for your family, ensure you pay them legally to protect yourself and your caregiver.

With NannyPay, paying your nanny legally is simple and affordable—and gives you peace of mind.

Ready to simplify nanny payroll? Try NannyPay today!