top of page

What to Say to a Nanny Who Wants to Be Paid Under the Table

When hiring a nanny for childcare, you are bringing someone into your home to take care of your most loved possessions – your children. You want the right fit and when you find it, you want to make it work.

But what happens when the seemingly perfect caregiver has all the qualifications you want, aces your interviews, gets along well with your children, and would be an ideal match for your family. All their references were glowing and there were no red flags on their background check. So, you make an offer confident you made the right choice.

The nanny is good with the offer … but they want to be paid under the table.

You are sure you mentioned this would be on the books at some point during the hiring process. But right at the moment when everything seems to be falling into place, your childcare plans are thrown into disarray.

What do you do?

Do you go along with your nanny’s wishes and pay them off the books? Everything about them is great. And who wants to go through the hiring process again. Plus, it would save some time and effort on everyone’s part, right?

But you know the risks. An injury at work leads to a workers’ compensation claim and some hefty fines. A nanny let go files for unemployment, which can also lead to fines and penalties. And if you have a security clearance or professional certification to maintain, your career can be put in jeopardy by any type of tax evasion including failing to pay your nanny taxes.

Often, nannies do not see the bigger picture when it comes to being paid legally and what benefits (both immediate and long-term) they may be missing.

Here’s what to say to a nanny who wants to be paid under the table.

Nannies benefit from legal pay

A big reason why nannies want to be paid off the books is to take home more money. Who does not want that?

But the benefits of legal pay far outweigh the small amount taken out of their paycheck each week.

With on the books pay, they have a legal employment history and verifiable income when applying for car loans, credit cards, or a mortgage and even to show that they can pay rent. Without proof of a job and steady income, none of this is possible.

Nannies gain protections with legal pay

When paid legally, nannies and other household employees are protected financially by workers’ compensation insurance, which provides coverage for lost wages and medical expenses if they get hurt on the job, and by unemployment benefits if they lose their job through no fault of their own. In states with disability insurance requirements, nannies can receive financial assistance if they get sick or hurt outside of work or become pregnant.

The number of states and cities with paid sick and family leave requirements is growing. Nannies can participate in these programs if they are on the books. As we just experienced with the pandemic, being able to take paid time off from work to recover from your own illness or to care for a family member was invaluable.

By being paid legally, they are also investing in their retirement years (they are not going to nanny forever!) as they grow their Social Security benefits and can get Medicare health coverage. Social Security is based on your 35 highest-earning years. Being paid under the table reduces opportunities to put away money for your future. It also can take at least 10 years (or 40 credits) in the workforce and paying into Medicare to receive medical coverage at retirement age. What better time to start planning than now!

Nannies can get tax breaks for legal pay

We often talk about how families can take advantage of tax savings when paying legally which can significantly reduce or even wipe out their nanny tax obligations.

Nannies – and other household employees – can also use tax breaks and tax credits like the Earned Income Tax Credit (EITC).

The EITC helps low- to moderate-income workers and families get a tax break. If they qualify, they can use the credit to reduce the taxes they owe – and maybe increase their refund.

You can provide health and other benefits

When a nanny is on the books, you can provide health benefits, like a QSEHRA (Qualified Small Employer Health Reimbursement Arrangement), which can be used to pay health insurance premiums – including plans purchased through the healthcare marketplace – and/or out-of-pocket medical, vision and dental expenses. A QSEHRA can also cover family members and be paired with a spouse’s health insurance plan.

With a QSEHRA, employer contributions are made pre-tax, lowering your employee’s taxable income, and saving everyone some money. Reimbursements are also tax free.

In addition, you can also make tax-free contributions to their student loans and/or other educational expenses.

You want to treat your nanny as a professional

This is someone you are trusting to care for and help raise your children. If you work out of the house, your nanny may be spending more time in your home during the week than you will! You want a professional caregiver and wish to treat them that way with all the benefits of legal pay. You do not want to first thing you do with your nanny to be committing tax fraud.

You are not willing to take the risk

Getting caught not paying your nanny taxes can be costly with fines, penalties, interest, and payment of back taxes easily adding up to tens of thousands of dollars. Under the table pay is simply not an option for you. Your legal obligation is to withhold payroll taxes and report your employees’ wages. As much as you think they would do an outstanding job, it is just not worth it to you.

Put it in writing

When hiring a nanny with all the benefits of legal pay, make sure your nanny contract reflects that. Put in writing what their gross pay will be. This is the amount of money they earn before taxes are taken out. Indicate which taxes will be withheld and how much. Also, include any benefits you are offering like health coverage or reimbursements for educational expenses that are only possible through legal pay. GTM Payroll offers a free nanny contract template that you can download and customize to fit your needs.

Reposted with a permission from GTM (

Recent Posts

See All

Nanny Tax Threshold Increases for 2024

The Social Security Administration recently released next year’s Employment Coverage Threshold for household employees. The 2024 nanny tax threshold increases by $100 to $2,700. This is the fifth cons


bottom of page