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One free scan finds every outdated or missing driver and matches the right update for your exact hardware.Free scan · exact hardware matchIf you hire a nanny and direct both the work and how it is done, you are generally the household employer—not the nanny’s employer agency—and may owe federal payroll taxes. For wages paid in 2026, Social Security and Medicare taxes generally apply once you pay that employee at least $3,000 in cash wages for the year; federal unemployment tax has a separate $1,000-per-quarter test. You may also need an employer identification number (EIN), a Form W-2, and Schedule H with your federal income tax return. State taxes and insurance rules depend on where you live.
Does your nanny count as a household employee?
Classification turns on control, not the job title or whether the nanny works full time. The IRS describes a household worker as your employee when you control not only what work is done but how it is done. A nanny or babysitter who follows your instructions about childcare and works in your home will generally meet that test.
Hiring through an agency does not, by itself, make the nanny an independent contractor. Nor do part-time hours or how often you pay the worker settle the question. Apply the control test to the actual arrangement. A separate business hired to perform a service, such as a repair contractor, may be an independent contractor; do not assume a nanny has the same status just because you pay them directly or issue a tax form.
Which federal nanny taxes may apply in 2026?
The tests below are separate. Meeting the FICA threshold does not automatically mean you meet the FUTA threshold, or vice versa. These are IRS parameters for 2026 wages; verify the rules for the year wages are paid.
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| Tax | When the federal test is met | Rate and wage limit |
|---|---|---|
| Social Security and Medicare (FICA) | You pay one household employee at least $3,000 in cash wages during 2026. If met, generally all of that employee’s 2026 cash wages are subject to FICA, subject to exclusions and the Social Security wage base. | Social Security: 6.2% employer and 6.2% employee, on wages up to the 2026 wage base of $184,500. Medicare: 1.45% employer and 1.45% employee, with no wage-base limit. |
| Federal unemployment tax (FUTA) | Total cash wages paid to household employees reach $1,000 in any calendar quarter of 2025 or 2026. | 6% on the first $7,000 of wages per employee. Qualifying state unemployment contributions may earn a credit of up to 5.4%, potentially reducing the federal rate to 0.6%. |
| Federal income-tax withholding | Generally not required for household employees. You may agree to withhold if the employee asks. | Use the employee’s Form W-4 and current IRS withholding procedures. No household-employer rate is specified here. |
How FICA works
When FICA applies, the usual combined Social Security and Medicare rate is 15.3%, split equally: 7.65% for you and 7.65% for the employee. You can withhold the employee’s share from wages or pay it yourself. If you pay that share instead of withholding it, the amount generally increases the employee’s wages for federal income-tax purposes.
Additional Medicare Tax withholding of 0.9% applies to an employee’s Medicare wages above $200,000. It is the employee’s tax; there is no employer match. The IRS also excludes some family wages and certain wages paid to workers under age 18, subject to exceptions. Check the detailed Publication 926 rules before applying an exclusion to a spouse, child, parent, or young worker.
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Why FUTA uses a different test
FUTA looks at total cash wages paid to household employees in a calendar quarter, rather than the annual wages paid to one employee. The potential state-tax credit depends on qualifying state unemployment contributions; it does not remove any separate state unemployment-tax obligation.
How to handle federal reporting and payment
- Confirm the worker’s status and the applicable taxes. Apply the control test to the working relationship, then check the FICA and FUTA tests above. Also determine whether any statutory family or age exclusion applies.
- Get an EIN. If federal household-employment reporting applies, obtain an employer identification number. The IRS household-employer checklist also covers checking work eligibility, determining which federal and state taxes apply, paying taxes, and keeping records.
- Agree on any federal income-tax withholding. You generally do not have to withhold federal income tax. If the employee requests it and you agree, use their Form W-4 and the applicable IRS procedures. Keep track of taxes you pay on the employee’s behalf because those payments can affect wage reporting.
- Prepare and file Form W-2 when required. For 2026 wages, the IRS lists February 1, 2027, as the date to furnish the employee Copies B, C, and 2 and file Copy A with Form W-3 at the Social Security Administration.
- Report household employment taxes on Schedule H. Generally file Schedule H with your individual federal income-tax return. If you are not required to file an individual return, the IRS says Schedule H may be filed separately. Employers who report other employees through business payroll returns may have a different reporting option.
- Keep records and check current instructions. Record wages and payments, withholding, and relevant employment details. For 2026 wages, the IRS lists April 15, 2027, for filing Schedule H with the 2026 federal return. Check current IRS publications and form instructions for adjusted deadlines and the filing route that fits your situation.
Failing to pay required employment taxes can lead to unpaid tax, interest, and penalties. Late or incorrect W-2 filing can also trigger penalties.
What you must check with your state
Federal compliance does not settle state obligations. The IRS directs household employers to their state unemployment-tax agency to find out whether state unemployment tax applies, and to check other state employment taxes and workers’ compensation insurance. Thresholds, registration steps, rates, and insurance requirements differ by location, so check the agencies for the state where the nanny works.
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