Do you actually need a payroll service to pay your nanny?
Summary
No rule says you have to use one. IRS Publication 926 is written for families who act as the employer themselves and report household employment taxes on Schedule H with their own Form 1040. Once you pay one worker $3,000 or more in cash wages in 2026, Social Security and Medicare taxes apply, 7.65% from you and 7.65% from the worker. If you do hand it off, ordinary business payroll software may not take you: Gusto says it does not support household employer payroll, and the specialist services that do cost roughly $39 to $75 a month for one nanny.
When a family becomes an employer
The IRS test is control. If you decide not only what work gets done but how it gets done, the worker is your employee. The IRS list of household workers runs from babysitters and nannies to cooks, drivers, private nurses, and yard workers. When an agency supplies the worker and controls the work, the worker is not yours, and a plumber or repair contractor running their own business is not your employee either.
Some pay never counts toward the thresholds: wages to your spouse, to your own child under 21, to your parent (with a narrow exception for a parent caring for your young child in certain family situations), and to a worker under 18 whose main occupation is not household work. A student's babysitting is not treated as a main occupation.
One nanny at $700 a week
- Annual cash wages: $700 × 52 = $36,400.
- Social Security (6.2%) and Medicare (1.45%): $2,784.60 is your share, and another $2,784.60 is the nanny's, which you either withhold from pay or cover from your own money. Total sent to the IRS: $5,569.20.
- FUTA applies once you pay $1,000 or more in a calendar quarter. It is 6.0% of the first $7,000, and with the full 5.4% credit for state unemployment tax the net rate is 0.6%, or $42. FUTA is never taken out of the nanny's pay.
- Federal income tax withholding is optional. You withhold only if the nanny asks and you agree, working from her Form W-4.
- Paperwork for 2026: Form W-2 to the nanny, and Forms W-2 and W-3 to the Social Security Administration, both by February 1, 2027; Schedule H with your return by April 15, 2027. Those forms need your EIN, which you can apply for online, and the IRS says to keep the records for at least four years.
You are not obliged to send the IRS a payment every quarter, but Topic 756 warns that an estimated tax underpayment penalty may apply if household taxes go unpaid during the year. The two routes it names are asking your own employer to withhold more from your paycheck and making 1040-ES estimated payments. State unemployment tax is a separate question that Publication 926 leaves to your state agency.
What household payroll services charge
Gusto's help center says it does not handle household payroll "because the tax rules differ" and points families to its partner Poppins Payroll. Published prices for one employee:
| Service | Monthly price | Terms that stand out |
|---|---|---|
| Poppins Payroll | $49, plus $10 per additional employee | Tax registration, new-hire reporting, quarterly filings, W-2, W-3 and Schedule H; says it will cover any penalty it causes; some state registrations cost extra |
| SurePayroll (Paychex) | $39 promotional, $45 list | One employee included, help registering a state tax ID, a "signature-ready Schedule H"; no penalty guarantee on the page. NannyChex now operates as SurePayroll |
| Care.com HomePay Essentials | $59 | Federal and state tax registration, quarterly filings, year-end forms |
| Care.com HomePay Plus | $75, first month free | Adds handling of tax agency notices and audit support |
| GTM EasyPay | From $70, plus $20 per additional employee | One-month minimum; GTM pays penalties and fines when it is at fault |
At list prices that comes to $540 to $900 a year for one nanny. Set against the $5,611.20 in federal taxes from the example, the fee pays for four quarterly filings, the W-2, and Schedule H. The taxes themselves stay the same either way.
Sources
- https://www.irs.gov/publications/p926
- https://www.irs.gov/taxtopics/tc756
- https://support.gusto.com/article/106622326100000/Household-Nanny-employer-payroll
- https://www.poppinspayroll.com/pricing
- https://www.poppinspayroll.com/faqs/what-is-included-for-49-a-month
- https://www.surepayroll.com/solutions/household
- https://www.surepayroll.com/resources/nannychex-is-sure
- https://www.care.com/homepay/product-and-pricing
- https://gtm.com/household/pricing/
Related on this site
- What does payroll software do, and where does a payroll service take over?
- If you pay both employees and contractors, are you charged payroll fees for both?
- Does a full-service payroll plan really take every payroll tax task off your hands?
- Payroll software pricing: the main page
Written by Kaz, independent publisher. No commercial relationship with the companies named unless it is listed on the disclosure page.
Published September 27, 2026. The figures above come from the government and vendor pages listed under Sources.
I have not used these products. Nothing here is a personal test result.
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