Can a nanny be paid as a 1099?

[ihugtrees]

I am considering working with a family who normally pays their nannies under the table, but I've asked them if we could do things the legal way. They said they would be glad to pay me as a 1099. Can we do that?

[Anna Phor]

No. A nanny is not an independent contractor (1099)--they are a household employee. Here's an IRS publication which (1) defines who counts as a household employee and (2) explains that the employer is required to pay social security/medicare for that employee:
http://www.4nannytaxes.com/forms/p926.pdf

[CI Mama]

I worked as a nanny about 12 years ago and now I hire a nanny.

I definitely recommend being "above board" for the financial safety & security of everyone involved.

You've got several options:
Be an employee (this is how I was hired & how I hire our daughter's nanny...it's the W2 option). Basically, in this situation the nanny is the employee of the family. As an employer, I make quarterly tax payments to the IRS, pay state unemployment insurance, etc. This is a little bit of extra work, but it hasn't been overwhelming.

Be an independent contracter (that's the 1099 option). This is the nanny setting up their own business and being self-employed. The IRS is very meticulous in how they differentiate independent contractors from employees, so be sure to get full information before moving ahead.

At any rate, don't take my advice for anything! Get a good financial advisor to help you figure out the best route for you. I've been self employed at several points during my life and if you don't anticipate your tax burden & pay it correctly, that can really come back to bite you!

[Caneel]

I would not accept them paying me on a 1099 because you will need to pick up both sides of the social security and medicare taxes, which will increase your tax bill by 7-some %. (I may have the % figure wrong)

Also, back when I was paid on a 1099 there was a debate within the company as to the legality of paying us on a 1099 because we were not free to seek additional employment elsewhere, which a part of the requirement to be an independent contractor.

[Sobranna]

Legally, no. If your employer tells you when and where to work, you should be paid as a W-2 employee. As a pp mentioned, this means the employer has to pay a share of the taxes (7.45% of your wages plus local and federal unemployment taxes), which is probably the reason they are reluctant to do so. That being said, are employees ever treated as contractors (ie paid on 1099's)? You bet. Just not legally. If you're wanting to do things right, I wouldn't accept 1099 payment, unless you're a drop-in babysitter working on your own terms.

[blessedwithboys]

i was a nany for a yr in my early 20's. not only did i not get a w2, i didnt get a 1099. they just paid me an extra $25 above our agreed on price so i could pay my own taxes. i was young and dumb...

i learned later that if you go to their house you are likely an employee but if they bring the child to your home you are likely a contractor. not always, but a good general guideline, along witha few other regs.

[Austin'smom]

I agree with the other posters.

If you are a full or part nanny for a family then they will need to pay 1/2 of your employment taxes, withhold federal/state income tax and issue you a W-2 at the end of the year. You are an employee if the employer can control not only what work is done, but how it is done. It does not matter whether you are full time or part time or that you were hired through an agency or from a list provided by an agency or association. It also does not matter whether if you are paid on an hourly, daily, or weekly basis, or by the job.

If you offer these services as a business to other families and watch other children in your home or business location then you are an independent contractor and subject to self employement taxes.

In general treating an employee as an independent contractor has more legal/tax repercustions for the employer than the employee.

I'll be happy to answer any additional questions.

[barcsmom]

I was a nanny in the mid 90's and was given a 1099. However, they paid all my taxes for me.

[lunarlady]

In our state (CO) there is a legal limit on the amount of time you can employ an independent contractor full time. (1099) I beleive it is 6 months. After that, they are considered a full time employee. (W2) The main difference is who pays the taxes. For 1099, the worker pays SS and tax. For W2, the employer must withhold and pay SS and tax.

We are looking at hiring a nanny, so we are up on the current laws. Any reason they want to pay you under the table? Do they not want to worry about paperwork? We are looking into a program called NannyTax, which you buy once a year for about $100. The program figures out the SS and income tax withholding, prints the forms, and does a year end W-2. If it is the paper work that is scaring them, maybe you could suggest that. If they are worried you will realize how little they are paying you when tax and SS is taken out...well, maybe you didn't want to work for them in the first place?