You’ve decided to participate in a nanny share with another family. In a nanny share, the nanny cares for the children of two or more families at the same time.
This arrangement can help you save money and maintain your flexibility with child care. Your children will still receive individual attention from the nanny and get the added bonus of socialization with the other kids in your share.
Remember, a nanny share is a business relationship you enter with another family (or families) and the nanny. To ensure a successful nanny share — one that benefits you, your children, other families and the nanny — make sure you follow these important steps.
1. Create a Work Agreement
Get together with the other family/families and specify the nanny’s schedule, wages, benefits and responsibilities.
2. Communicate throughout the Process
The key to any business relationship is communication. This means between you and the other family/families and with the nanny. Make sure any issues between the families is worked out BEFORE talking with the nanny. This makes sure your communication is clear and eliminates confusing or conflicting messages.
3. Register with the IRS
Each family must register with the IRS and your state’s revenue department. A tax identification number will be issues to each family.
4. Check on Workers’ Compensation Insurance
Many states require workers’ compensation insurance for domestic employees. If it is a requirement in your state, each family must obtain coverage for the family.
6. Withhold Taxes from Your Nanny’s Pay
Each family must withhold federal and state taxes from each paycheck.
7. Complete a Schedule H
Each family must complete a Schedule H form when filing their personal income taxes. Schedule H accounts for the federal taxes withheld from your nanny’s pay.
8. Issue Form W-2 at End of Year
Each family must issue Form W-2 to the nanny at the end of the year.
The tax responsibilities and legal obligations for a nanny share can be complicated and time consuming. Doing it incorrectly could mean fines and penalties from the IRS. Being non-compliant with the law — paying your nanny under the table — could lead to audits or employee lawsuits. Using a payroll services company will remove the guesswork, ensure you are compliant and frees up your time for the things in life you enjoy. Learn more about products and services from GTM Payroll Services.