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When interviewing nannies, one of the most common things that will get brought up is how payment will work. We cover one of the most common questions, whether or not you should pay your nanny under the table.

While it might seem like a good idea to open the wallet and pay your nanny in cash, it’s also important to set clear expectations and create a routine when it comes to payment.

Here are the advantages to paying cash for nanny services:

  • Less of a tax burden on the hourly wages
  • Less paperwork when it comes to contracts and IRS filings
  • More likely a better rate when it comes to hourly wages

Here are the risks of paying under the table for nanny services:

  • It is illegal to pay someone “under the table” in most cases
  • Tougher to enforce a contract when all payment is off the books
  • Keeping track of payments is trickier
  • Childcare can’t be written off as a tax deduction

Nanny care has always been in a gray area when it comes to payments in cash. When we anonymously asked several customers how they pay their nanny, most said under the table. The tax burden of paying them on a 1099 contract would make the hourly rate jump considerably, so most have worked out a “cash” rate that they have pre-negotiated with their childcare providers.

If you decide to pay cash for you nanny service, make sure that you have a process and plan in place and that you have had several very clear conversations with your nanny.

Chances are they will likely prefer to be paid under the table if it means they get a better hourly rate as well, but just because both of you agree to this type of system doesn’t mean it won’t be complicated later. While it likely won’t be as enforceable due to the nature of paying under the table being illegal, it helps to have as many details as you can get written down in one document, signed by both parties.

These outlined expectations can be used as a system of checks to make sure that both sides of the agreement are being satisfactorily completed.

For us personally, we officially recommend setting up a 1099 contract with your nanny. While the tax burden might sting a little, keep in mind that you do get to write off your childcare expenses if they are filed properly with the IRS. We believe that it’s best to keep things above the table in childcare, most specifically because it means more official contracts can be written, and in those contracts you can create peace of mind that everything is in order when it comes to the care of your child.

Looking for a reliable nanny? Use our custom search to find a nanny in your area!