How to Find the Best Nanny Payroll Service

Sep 27, 2023 | GTM Blog, Household Payroll & Taxes, Tax & Wage Laws

With complex tax, wage, and labor laws, a lot goes into paying your nanny. Rather than take on the stress and burden of paying your nanny legally, not to mention the time involved, many families sign up with a nanny payroll service. Here’s how to find the best nanny payroll services to ensure your nanny is paid legally and compliance is taken care of.

There is a lot that goes into paying your nanny. Federal and state taxes, overtime rules, W-2s, and Schedule H to name a few of the complexities. Rather than take on the stress and burden of paying your nanny legally, not to mention the time involved, many families sign up with a nanny payroll service. The best nanny payroll services make sure your nanny is paid legally and all tax compliance issues are taken care of.

Finding the best nanny payroll services

Ratings and reviews

Positive reviews from users are certainly a plus when finding the best nanny payroll service. You can search Google for reviews and look on payroll services sites. However, the downside to reviews are that people who are using the service aren’t experts on nanny payroll and taxes. They can comment on service, but they don’t know whether the company is doing things accurately on the nuances of nanny payroll.

Best nanny payroll lists

Lists of the best nanny payroll services are a starting point for firms to consider. However, beware that many lists have partnerships with companies and drive revenue-sharing traffic to these companies.

What should a best nanny payroll service offer?

Several factors should be considered when evaluating a nanny payroll service. You’ll want to ask these questions before making the final decision to sign up for a service.

Nanny tax guarantee

Does the service guarantee to pay any penalties incurred if they make a mistake with your nanny tax filings? You don’t want to be left paying costly penalties if the payroll service caused the error.

Do they do nanny taxes right?

Every nanny service says it will handle your taxes. Make sure they remit state and federal taxes and ask if they do so electronically.

Does the “best” nanny payroll service handle state-specific benefits for nannies?

Many states have paid family leave and paid sick time for nannies. Some have a domestic workers’ bill of rights. The nanny payroll service you choose should know about these requirements and, most importantly, be able to handle them for you. Check for your state-specific household employment labor regulations.

Use this to ask some questions about the service before deciding. For example, if you live in Massachusetts, there is a Paid Family and Medical Leave (PFML) program, which requires a contribution from your employee’s wages to be remitted to the state. It would be important to ask if the service provider you’re considering will do this.

Does the service offer workers’ compensation insurance?

Nearly half of the states require you to have workers’ compensation insurance for your nanny. Check this chart of workers’ compensation requirements to see if your state is one of them and ask if your nanny payroll service provider can obtain workers’ compensation insurance for you.

Also, ask if coverage is provided by the payroll firm or offered through a third party. It’s much easier to make claims, get support, and handle audits if you get your workers’ compensation policy and payroll services from the same firm.

Who will get your EIN?

You will need a federal EIN (Employer Identification Number) if you employ a nanny. Find out if you have to file for this or if the nanny payroll service will take care of it for you. Also, ask about state forms you might need like a new hire report and a state tax ID.

Customer care options

You may have questions to ask. Sometimes, things go wrong. Not even the best nanny payroll company is perfect. Before choosing a nanny payroll service provider, find out their service hours and ways to contact them. Is it just an online form or an email address? Can you speak with a person who is knowledgeable about household employment? Do they have online chat?

Are household employment payroll and taxes their specialty?

Anyone can say they do nanny payroll and tax service. Some of the big business payroll companies claim that. The reality is you are left to understand the nuances and regulations around household employment when using a business payroll service to do your nanny taxes.

What is the sign-up process like?

Regardless of what nanny payroll service you choose, there is a lot of paperwork to fill out when signing up. The best nanny payroll services will have an online onboarding process that takes you through the information steps you need to provide, which can be done via your mobile device. Make sure to find out the process before you say yes.

Nanny onboarding

At the time of sign-up, your nanny needs to provide information like a W-4, bank account information for direct deposit, Social Security number, and contact information. Ask if the company has an online onboarding process for the nanny. This takes the burden off you and makes it easy for your nanny to provide accurate information via their mobile device.

Online dashboard availability

Does the service have an online login where you can enter hours, view your employee’s pay stubs, track time off, and change employee information? Is there a nanny version of the dashboard where your nanny can view their pay stubs and W-2s, edit their contact information, and change their tax withholdings? This is a great perk for your nanny.

Year-end tax documents – do they produce them?

You’ll want to sign up with a company that provides a Form W-2 for your nanny and a Schedule H for yourself, which must be filed with the IRS at tax time. Make sure these documents are provided by the service you choose.

Security – don’t ignore this!

You are dealing with highly sensitive financial information about yourself and your nanny, such as bank account info and Social Security numbers. What, if any, data security measures does the nanny payroll service you are considering have in place? You want to look for two-factor authentication, data encryption, secure file uploads, a fraud prevention program, and ongoing employee data security training.

GTM Payroll Services goes one step further with a SOC 1 audit developed by the American Institute of Certified Public Accountants (AICPA). A third-party auditor conducts a SOC 1 audit to validate that a service organization’s critical internal compliance and information security controls are operating effectively. It is considered the industry standard for evaluating, testing, and reporting these controls and shows a firm’s commitment to client information security.

Cheapest nanny payroll service

By now you should realize that not all nanny payroll service providers are created equal. Don’t just shop by price. First, ask the critical questions and do your due diligence to pick the best nanny payroll service provider for your family.

GTM Payroll Services: the best nanny payroll provider

Yes, we are biased, but nanny payroll and taxes are something we’ve been doing in all 50 states for more than thirty years. It is what we specialize in. Call us at (800) 929-9213 to sign up or for a complimentary, no-obligation consultation with a household employment expert. Or schedule time with us at your convenience.