Payroll and Tax Concerns for families in a Nanny Share

In a nanny share, where two or more families employ the same nanny, each family is considered a separate household employer by the IRS. This means each family has their own set of responsibilities when it comes to paying employer taxes. Here’s a breakdown of how it works:

Determine Each Family’s Share of Wages

Agree on a wage: The families and the nanny must agree on a total hourly wage.

Divide the cost: The families then decide how to split the cost. This is often done based on the number of children from each family or the number of hours the nanny cares for each family’s children.

Each Family Acts as a Separate Employer

Separate EINs and State Account numbers: Each family needs to obtain their own Employer Identification Number (EIN) from the IRS.  This is like a Social Security number for your business as a household employer.   Each Family must also set up separate tax and unemployment insurance IDs with their state.

Separate Payroll: Each family is responsible for calculating, withholding, and paying their portion of the nanny’s taxes based on the wages they pay.

Reporting and Paying Taxes

Quarterly Tax Payments: Each employer makes their own separate tax payments.

Annual Reporting: Each family will need to:

Provide the nanny with a W-2 form by January 31.

File Form W-3 with the Social Security Administration by January 31.

File Schedule H (Form 1040) with their personal tax return to report household employment taxes.

As a Savvy Nanny Payroll Services client, you will receive a W-2 form and a Schedule H from us during the month of January.  Your W-3 will be filed by us.

Key Takeaways for Nanny Shares

Clarity is crucial: Have a clear written agreement with the other family and the nanny outlining wages, hours, and each family’s responsibilities.

Separate accounting: Keep separate records of wages paid and taxes withheld for your own household.