Updated on February 16, 2022: Using words like always and never when discussing taxes is impossible. Every nanny is different. There are different types of nannies. Most nannies are W-2 employees, but not all. If you are unsure of what you should do, talk to a local tax professional. I’ll admit, I didn’t go to school and learn how to do taxes, but I did my research and put this article together. If you are still confused or disagree with my findings, that’s okay. You talk to your tax professional and figure out what’s best for you.
I’ve often said on this site that nannies can “be their own boss,” and “own their own business.” However, if you do a quick search online, you’ll see a mass of posts and comments telling nannies that you must be an employee. Most people seem to think that a nanny is “NOT an independent contractor.”
According to Homeworksolutions.com:
“A nanny, housekeeper, or home health aide that you hire directly is your employee under common law. It does not matter how many hours they work, whether the position is permanent or temporary, or how much you pay the worker.”
So, what’s the deal? Are nannies only allowed to be employees?
This site contains affiliate links to products. We may receive a commission for purchases made through these links. Read our full disclosure here.
Is it possible to be self-employed as a nanny?
First, let’s start by evaluating the difference between an household employee and a sole proprietor or independent contractor. At the end of this article, there’s a 1099 vs. W-2 checklist that can help you decide how to file at first glance.
(For the sake of this article because I live in Washington State, I will only be referencing the laws in the United States. However, some of these principals may apply to other countries as well. Please, make sure to check with a tax professional in your area.)
To get some help, I’ve gone ahead and asked a few U.S. tax professionals about this issue. I wanted to know what are the main differences between an employee and an independent contractor. Here’s the basics:
WORKING HOURS: An employee’s working hours are determined by the employer. A 1099 worker ultimately determines their own hours.- WORKING PROCESS: An employee’s working process is stipulated by their employer or manager. Often, training is provided for the employee to ensure that they meet the employer’s standards. The independent contractor uses whatever methods, tools and processes that they deem appropriate for the work.
WORKLOAD: Employees are assigned what type of work they do by their bosses or supervisors. These employees have little say about their workload and deadlines. An independent contractor only does the work they see fit. They can accept or reject assignments at their discretion. 
TOOLS & EQUIPMENT: An employee is not expected to have their own tools to work on an assignment. The needed equipment is to be provided by the employer. Independent contractors have to supply their own equipment, and they get to decide which tools are most appropriate. - EMPLOYERS: As an employee, you will have a single employer. This entity is responsible for assigning you a workload, stipulating their preferred processes and providing the needed tools to carry out those assignments and processes. As an independent contractor, you will usually have multiple clients. A freelancer does not usually have a single source of income, but finds work from many different companies and individuals. These multiple entities hire them as an independent contractor.
The answer to the question “can nannies be self-employed” is “yes, but it depends.”
What does it depend on? Homeworksolutions.com tells us:
“Under common law, a worker who performs services for you is your employee if you can control what will be done and how it will be done.”
Status as an employee basically depends on who’s calling the shots.
From this, we can see that there are two types of nannies. Some nannies work as employees, hired by the family. Other nannies take on the role of an independent contractor. Honestly, Newborn Care Specialists are usually the few nannies that qualify as independent contractors.
How can you determine which you should file as? Let’s take a look at each.
Nannies as Employees
Parents most often hire nannies as employees. What makes these nannies different than independent contractors?
It comes back to that question: “who’s calling the shots?”
H&R Block says:
“If [the parents] control how the work is performed, the babysitter is a household employee.”
While the hours worked need to be negotiated between nanny and family in any case, many nannies meet the specifications of an employee in a few main ways.
- The nanny is required to care for the children at a location chosen by the parents.
- The parents provide all equipment needed to care for the kids, rather than the nanny.
- The nanny only works with one family at a time.
- All care protocol is specifically stipulated by the parents, not allowing the nanny to determine best care practices.
Self-Employed Nannies
There are circumstances in which a nanny would not be considered a household employee.
Let’s go ahead and use the same meter that we established up top for an independent contractor and apply it to nannies.
- It is primarily up to the nanny’s discretion where care is to be provided. For instance, the nanny may determine that her kids need stimulating outdoor activities away from home and do them, rather than plan it with the parents.
- Many nannies DO provide their own tools and equipment for their job. Many nannies bring a ‘nanny bag’ to every job they have. While this may not contain everything that will be needed to care for the kiddos, it has many of the nanny’s preferred tools of the trade. As independent contractors in other fields do, she may charge the parents for necessary materials purchased (such as diapers, food, and other essentials) or use supplies on hand.
Combining this with the first point, the Nanny may decide to, at times, care for the children in the nanny’s own home so that she has immediate access to her preferred equipment and supplies.
It is up to the self-employed nanny whether or not she takes on more than one client at a time. As she is not an employee, she can work with multiple different families at a time at her discretion.
- Many self-employed nannies have several detailed processes for caring for children under their watch. These nannies tell the parents how they plan on caring for the little ones. Individual needs and details of the kids are negotiated and decided between the Nanny and Family.
Again, let’s see what H&R Block says about this issue:
“If the babysitter controls how the work is performed, the babysitter is self-employed. Self-employed workers usually provide their own tools. They offer their services to the general public in an independent business. If a babysitter or nanny is self-employed, you don’t have reporting or withholding requirements. The babysitters still must report their income to the IRS.”
At this point, we see that many nannies could clearly be considered an independent contractor. In the U.S. the tax form 1099 would be used for this kind of nanny.
This could be summed up in three main points:
- Care is provided by the nanny outside the parent’s home. (If this alone is true, then a nanny would not be considered a household employee)
- The nanny has significant influence/control over how care is provided.
- Nanny has the right to say “No” to work without repercussions.
[Source]
Does a “Regular Schedule” Mean Nannies are Employees?
All of this being said, I’ve seen it suggested that if you have a “regular” schedule with a family, then you are, by law, considered an employee. For instance, amynorthardcpa.com asserts:
“… if there’s any sort of regularity to your babysitter’s schedule (e.g., they work for you every weekday or consistently on Friday nights), where you expect them to show up to your place unless they tell you otherwise, they’ll almost certainly be seen as an employee.”
To see if this is the case in the U.S. I went ahead and asked two Certified Public Accountants (CPAs) what they knew about this issue.
“If you set the schedule for your availability for the family, and that schedule remains flexible and negotiable, then you would appear to be an independent contractor. If the family sets your schedule, with limited or no flexibility or input from you, then you would be considered an employee.”
Mitch (CPA) pointed out many of these articles use terminology like “always,” “never,” or, in this case, “any” with regards to tax law. The fact is, he points out, is that these statements are “usually not 100% true.“
“to say if there is ‘any sort of regularity’ has ambiguity while trying to sound exact. What does regularity mean? That is up to a CPA/tax professional to determine for the nanny on a case by case basis depending on the other points you made earlier. Wide sweeping statements made by CPAs/tax professionals on matters that could have multiple outcomes are not wrong, but are usually not 100% right either, as situations/details are different on a case-by-case basis.”
The fact is many workers – nannies included – do not 100% fit the criteria for an employee or an independent contractor. There are often multiple, differing factors at play. This is why it is a “case-by-case” situation.
Mitch made it clear:
“Just because one piece of evidence points in one direction does not mean the entire investigation now is that way, you have to look at all the evidence together.”
- Did the nanny set her own schedule, or did the parents?
- Does the nanny inform the parents when she is not able to work, or does she risk losing her job for doing so?
- Does the nanny only work in the parent’s home?
These are the sorts of questions that have to be asked when answering this question.
If we look back at our first question: So, what’s the deal? Are nannies only allowed to be employees? The answer is No.
Nannies CAN be self-employed business owners.
But I can’t tell you what you should be considered. You can start by comparing the way you work with the criteria in this article. Then, you should contact a local tax professional to see if that’s the best solution for you. If you’d like to see how I get my documents and numbers ready for taxes, watch my Tax With Me video.
2 thoughts on “Are Nannies Employees or Business Owners?”
If you want to insist that nannies can be independent contractors, you should inform your readers that being a 1099 IC doubles their tax burden when it comes to SS and Medicare taxes.
An employee nanny pays 7.65% in SS/Medicare taxes. Her employer pays the other half of those taxes.
An IC nanny pays all 15.3% of those taxes herself.
Let’s consider 2 nannies. They both earn $50,000 a year.
Nanny Jane is an employee. She pays half of the SS/Medicare taxes, and her employer pays the other half. Nanny Jane pays $3,825 in employment taxes, plus her federal, state, and local taxes.
Nanny Sarah took your advice and is a 1099 IC. She pays all of the employment taxes herself. That takes $7,650 out of her pay before she even starts to pay federal, state, and local taxes.
Don’t choose to lose $3,825 you could keep! Be smart and insist on being a nanny who is an EMPLOYEE!
Thank you Deborah for that example. I completely agree with these numbers. Being a 1099 is not for most nannies. However, there are nannies out their that are ICs and this is a resource for them too. When you spend a lot/ put a money back into your work (supplies, clothes, added mileage, office space) it can be better to pay for those taxes because you’ll actually pay less in income tax. Every situation is different which is why I mentioned the importance of talking to a local tax professional. Thank you again for explaining this with examples and for being kind about it. Together we can build up this community and get all the information out there 🙂