That moment when you realize paying your nanny through Venmo might come with tax consequences… We’ve all been there. You just wanted an easy way to handle payments, but now you’re wondering if the IRS is going to come knocking.
The truth is, paying household employees comes with real tax responsibilities – whether you use Venmo, cash, or carrier pigeon. But don’t worry, we’re going to break it all down in plain English so you can stay on the right side of the tax laws without losing your mind.
The Short Answer: Yes, Nanny Payments Are Taxable
Let’s cut to the chase: the IRS absolutely considers nanny payments taxable income. It doesn’t matter if you pay through Venmo, Zelle, or a briefcase full of cash – if you’re paying someone to care for your kids in your home, there are tax rules you need to follow.
The magic number to remember is $2,400 (for 2024). Pay your nanny more than that in a year, and you’re officially a household employer with payroll tax obligations. Even below that amount, your nanny should still be reporting that income.
How Venmo Reports Payments to the IRS
Here’s where things get interesting with Venmo. The app does report some transactions to the IRS, but not in the way most people think. For personal payments between friends (like splitting dinner), Venmo doesn’t report anything. But if you’re sending money marked as “for goods and services,” that’s a different story.
Starting in 2024, Venmo will report business transactions over $600 to the IRS using Form 1099-K. The tricky part? There’s no clear “nanny services” category, so these payments might slip through – but that doesn’t mean you’re off the hook.
What Happens If You Don’t Report Nanny Taxes?
Playing fast and loose with nanny taxes might seem harmless, but the consequences can be brutal. The IRS has gotten scarily good at tracking digital payments, and they’re cracking down on unreported income.
If they catch you, you could be looking at back taxes plus interest, plus penalties that can add up to 25% of what you owe. And it’s not just you – your nanny could get dragged into an audit too if they haven’t been reporting that income on their taxes.
How to Legally Pay a Nanny (Even Through Venmo)
The good news? Staying legal isn’t as complicated as you might think. First, you need to classify your nanny correctly – nearly all nannies should be W-2 employees, not 1099 contractors.
You’ll need to withhold Social Security and Medicare taxes (7.65% from their pay, plus your matching 7.65%). There’s also federal and state unemployment insurance to consider. At year-end, you’ll provide a W-2 just like any other employer.
Pro tip: Using a payroll service like HomePay can automate all this for about $50/month – well worth it for the peace of mind.
Can You Ever Pay a Nanny Under the Table?
Let’s be real – plenty of parents pay babysitters in cash without thinking about taxes. For occasional babysitting gigs under $2,400/year, the IRS probably won’t come after you. But if you have a regular nanny coming to your home multiple days a week? That’s a different story.
The risk isn’t just about getting caught – it’s about doing right by your employee. Paying properly means they get Social Security credits and unemployment protection if they need it.
FAQs
Do I need to pay taxes on babysitting money?
If you’re the parent paying a babysitter, you only need to worry about taxes if you’re paying $2,400+ to a single caregiver in a year. If you’re the babysitter making $400+, you should report it as income.
Do I have to pay taxes if I get paid through Venmo?
Absolutely. The IRS doesn’t care how you get paid – if you earn money, it’s taxable. Payment apps might not withhold taxes, but you’re still responsible for reporting the income.
Is it illegal to give a nanny a 1099?
In most cases, yes. Nannies are almost always household employees who should get W-2s, not independent contractors. Misclassifying them can get you in hot water with the IRS.
Will the IRS go after my babysitter?
They certainly can. If your caregiver isn’t reporting their income and gets audited, they could owe back taxes plus penalties. It’s better for everyone to keep things above board.
