Today at Oh So Simply, we’re discussing what’s involved in starting a business as a nanny.
Do you need a business license to be a nanny?
As a disclaimer, I only have experience working as a nanny in the United States. Therefore, I cannot comment specifically on the legalities of nannying in other parts of the world. That being said, many of the same principals will apply.
To answer the question – do you need a business license to work as a nanny – depends on your situation. If you work for the nanny family as an employee, you don’t need a license. However, if you work as a contractor, you might need a license. The requirements of working as a contractor vary state by state, but you will likely need a business license to work as a self-employed nanny. Federally, there is no requirement to have a business license. All you need to worry about is filing as a sole proprietor.
Should you need a license where you live, it’s not a large investment. It cost’s under $100. Ours was under $50.
What paperwork do I need?
First and foremost, you need a contract. A contract will outline the details of your business. For instance, it will describe
- the type of work you will do for clients
- how much you will charge clients wages in typical working situations and how much you should be paid for special requests
- work times and an average schedule
- causes for termination and termination details
- social media permissions
- what’s expected of both parties
Second, you will need a medical consent form. Your medical consent form is the document that will allow you to make medical decisions on behalf of the parents for the kids in an emergency.
Third, you’ll need a tax tracker and tax binder. With these two tax items, you will:
- store receipts
- track your work commutes
- track child care milage
- record business expenses
- store and categorize invoices
How can a nanny be prepared for tax season?
First, you need the tax tracker and binder, as mentioned earlier.
In the tracker, you’ll record miles driven to and from your work location. Separately, you’ll record where you drive with the kid, such as to school or a play-date.
Why separate miles that are driven with the kids from miles driven during your commute? The government can compensate you for miles driven for work, so you could lump all of the driven miles together into one number for which the government will pay you. However, you can also charge your clients for work miles driven with the child. For example, last I remember, I could get paid from the federal government $0.55 per mile driven for work, but I would have to wait until tax season to get my reimbursement. The last family I worked for offered to pay $0.50 per mile driven, and I would get this payment as soon as they paid their invoice. Later, the government will pay the difference of $0.05 per mile driven for those miles that I billed the parents.
What it comes down to is: Do you want your reimbursement NOW or LATER? I like to charge the parents for a portion of the mileage reimbursement each week. That way, I’m getting my gas money back that I had to spend caring for their kid.
You’ll record the amount of time you worked on which days and the amount of money you made. Tracking these is very important if you are an independent contractor because you’ll be reporting these numbers to the government. However, if you’re an employee, I would still recommend you track these so you can spot any discrepancies in payments and compensation.
Make sure to keep track of business purchases. An example of a business purchase would be your nanny wardrobe. Many nannies use their daily clothes as their work clothes, but I recommend getting a specific set of work outfits. They can be regular, casual clothes, but they are dedicated to your work and only used then. Why? If you have work specific clothes, you can write them off on your taxes as a business expense. And let’s face it, nannying is often a dirty job. You can ruin your clothes as a nanny.
Do you need to keep your receipts?
Yes. In the rare instance where you or your nanny family is audited, your business-related receipts will be necessary. When audited, the IRS is going to want to see all of your expenses in the form of receipts.
Keeping receipts also helps you show the family what you spent on the job, making it easier to get compensation when you invoice them.
How do you keep receipts?
You can keep records of your receipts digitally with an app like Expensify or Everynote. These make it easy to snap a picture of your receipt and file it away into the proper place, leaving your house and car clutter-free! You can also keep physical receipts in your tax binder. I use a pouch inside my tax binder to file business receipts away. You’ll want to keep receipts for all the things you charge the family. Anything you’ve spent on your nanny kids or the nanny family’s house should have their receipts stored away.
Speaking of money and invoices, I like to get paid through the Cash App. It’s a smooth, free, and easy to use experience. And if you click our link, we both get $5 for signing up!
For invoicing, I use Wave invoice. Through Wave, it is easy to keep track of your invoices and automate many of your weekly processes. You can set each family you work for at specific rates so that you only have to enter the hours worked. Then, Wave will calculate your earnings and send the invoice to the family. Wave, like the Cash App, is also free.
If you’d like to try something different, I recently found the Invoice-Generator.com. Every time you open the website, it automatically changes your invoice number to the next number. This is super easier to use and navigate. However, it does not automatically send invoices directly to families.
What sort of prerequisites do you need as a nanny?
In the United States, there are no prerequisites or certifications needed to become a nanny. However, you must get certified in CPR & First Aid. Not only do many parents require this of their nannies, but it gives you the training you need to put the safety of the child first.
If you would like to be better prepared to care for children, there are often free parenting and babysitting classes you may be able to find at your local college that will give you a basic set of skills to better care for your nanny kids.
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