Paying Your Nanny Legally in Texas
Should you pay your nanny cash?
Learn why it’s important to pay your nanny legally, what paperwork you’ll need, and which providers offer nanny payroll services in Texas.
Can I pay my nanny cash “under the table”? The short answer is generally “no.”
The rules around paying your nanny, babysitter or other caregiver are straightforward: if you pay these employees $2,300 annually or more than $1,000 in a quarter to perform work in your home, you are a household employer and you are required to pay “nanny taxes” or “household payroll taxes.” If you’re hiring a full-time nanny for more than a month, you will likely meet the threshold for being a household employer.
Why should I pay nanny taxes?
By paying taxes, you are providing your nanny with a reportable income, which is important for housing and credit. You’re also giving your nanny Social Security, Medicare and Unemployment benefits. Consider how many out-of-work employees relied so heavily on unemployment in 2020, and what another crisis might mean for someone like your nanny if she has underreported income from previous work.
How much will my tax obligations be as a Texas household employer?
We’ll use an average salary example to see what your additional investment will be by paying your nanny legally.
If you pay your full-time nanny $18/hr, this typically translates to $1,440 per pay period (biweekly) or $37,440 annually. At this salary, and making some standard assumptions about your employee, your additional employer tax responsibilities are approximately $3,150 annually. You may also qualify for tax savings with the Child & Dependent Care Tax Credit ($1,600), but this depends on your household income and any tax policies that are in place when you file your taxes.
These calculations were done on GTM.com (Payroll and HR services).
What paperwork do I need to fill out in Texas to handle payroll?
If you choose to do your own payroll, you will need the following:
EIN, Employer Identification Number
Form I-9, Employment Eligibility Verification
Form W-4, Employee’s Withholding Certificate
Form 1040-ES, Estimated Tax for Individuals
Form W-2, Wage and Tax Statement
Schedule H, Household Employment Tax
Form C-20, Domestic Employer Quarterly Report
Can I use a payroll service to handle my nanny’s payroll?
Yes! When you use a payroll service, they will handle setting your employee up and you can choose to use their direct deposit services so you never have to worry about writing a check or filing your quarterly and annual taxes.
We refer all of our clients to Poppins Payroll because of our experience with their customer service, which was stellar, and you’ll find a list of available payroll providers below with pricing provided when this article was written (Dec. 2021):
Poppins Payroll: $45/mo
GTM: $65/mo
Home Work Solutions: $56.25/mo
Nest Payroll: $39/mo
SurePayroll: $49.99/mo
NannyChex: ~$66.25/mo for bi-weekly paychecks
Please note that this article is meant to provide information and should not be considered legal or tax advice. Please consult with your attorney or tax professional if you have specific circumstances that require professional guidance.
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