I haven't been paying nanny taxes. How do I catch up?
Updated November 6, 2026 · For 2026 · General information, not tax or legal advice
Getting current is mostly paperwork, and doing it voluntarily is far cheaper than doing it after a state unemployment inquiry. Here is the order that works.
1. Total the wages by year
Pull bank transfers, Zelle or Venmo history and any cash records. You need gross wages per calendar year per employee. If you reimbursed mileage or supplies, separate those out; they are not wages.
2. Get an EIN and register with your state
Apply for an EIN now if you do not have one. Register for state unemployment tax and tell the agency the date employment actually began; most states let you file the missed quarters online and bill the back tax plus interest.
3. Decide who pays the employee's share
You were supposed to withhold 7.65% from each paycheck. For past years you can either pay both halves yourself (common, and simpler for the relationship) or agree with your nanny to recover their share from future pay. If you pay their share, that amount is additional wages to them.
4. File or amend the federal returns
- For a year you already filed: Form 1040-X with Schedule H attached, paying the household employment taxes plus interest. The IRS adds a failure-to-pay penalty of 0.5% per month, capped at 25%.
- For the current year: just include Schedule H when you file.
- Issue a W-2 for each past year and file it with the Social Security Administration with Form W-3. Late W-2 penalties are modest and sometimes waived for first-time filers.
5. Fix the nanny's side
Your nanny amends their return for each year to report W-2 wages instead of unreported or self-employment income. If they paid self-employment tax on a 1099, the amendment produces a refund of the employer half, which offsets what you now owe them.
6. Set up payroll properly going forward
Withhold 7.65% from the first paycheck, pay estimated taxes or raise your own withholding, and keep a stub for every payday. CareTab handles the ongoing part for $14.99 a month, including the state quarterly figures. For the past years, a CPA who does household payroll can usually clean up two years in a few hours.
Frequently asked
Can I just start paying nanny taxes going forward?
You can start now for the current year. Prior years remain owed, and the nanny's own return for those years will not match. Most families clean up at least the current and prior year.
Will my nanny get in trouble?
The nanny owes income tax on the wages either way. Once you issue a W-2 and pay the employer share, the nanny amends to report the W-2 wages; their Social Security share is withheld or settled with you.
Do I need a CPA?
For one or two years with a single employee, Schedule H and Form 1040-X are manageable. For several years, multiple states or a large balance, a CPA familiar with household employment is worth the fee.
Pay your nanny legally for $14.99/month
Hours, paychecks with every federal and state tax computed, pay stubs, PTO, and a filing calendar with the figures pre-filled. 14-day free trial, no card needed.