NANNY PAYROLL & TAXES
Paying your nanny
the right way.
The "nanny tax" trips up thousands of families every year. Here's everything you need to know, plus two trusted payroll services that make compliance effortless so you can focus on your family.
$5,000+
Avg annual employer taxes (Denver)
$10k+
IRS penalty for non-compliance
W-2
Required — not 1099
EXAMPLE: NANNY EARNING $28/HR, 40 HRS/WK (DENVER AVERAGE)
Gross annual wages
$58,240
Social Security (6.2% employer)
$3,611
Medicare (1.45% employer)
$844
Federal unemployment (FUTA)
~$42
State unemployment (varies)
~$200–400
Workers' comp insurance (required)
~$400–800/yr
Estimated employer tax cost
~$5,100–5,700/yr
Based on $28/hr × 40hrs/wk — typical Denver full-time rate. Includes required Colorado workers' comp. Actual amounts vary by wages, state, and benefits. A payroll service calculates exact figures for your situation.
✔ HOUSEHOLD EMPLOYER COMPLIANCE ✔ FEDERAL & STATE TAX FILING ✔ PROTECT YOUR NANNY'S BENEFITS ✔ DENVER & NATIONWIDE
NANNY TAX EXPLAINED
Why this matters more
than most families realize.
When you hire a nanny who works in your home, the IRS classifies them as a household employee, not an independent contractor. That means you have legal obligations as an employer, whether you like it or not.
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Paying "under the table" is illegal
Paying cash without withholding taxes exposes you to back taxes, penalties, and interest. It also means your nanny can't collect unemployment if you let them go.
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Your nanny must receive a W-2, not a 1099
The IRS is clear: household employees are W-2 employees. Issuing a 1099 is incorrect and can trigger an audit for both you and your nanny.
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It protects your nanny too
Proper payroll means your nanny earns Social Security credits, can claim unemployment if needed, and has a legitimate employment record, things they deserve.
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Workers' comp insurance is required in Colorado
Colorado law requires household employers to carry workers' compensation insurance for any employee working 40+ hours per week. If your nanny is injured on the job without coverage, you are personally liable for medical bills and lost wages, which can be substantial. GTM can bundle this into your payroll service.
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It can be simple — with the right service
A good nanny payroll service handles all of this for you automatically. Most families pay $500–$1,500/year for full-service payroll, a fraction of the risk of non-compliance.
WHAT THE NANNY TAX INCLUDES
Social Security (employer share)
6.2%
Medicare (employer share)
1.45%
Social Security (withheld from nanny)
6.2%
Medicare (withheld from nanny)
1.45%
Federal unemployment tax (FUTA)
6% on first $7k
State unemployment tax (SUTA)
Varies by state
Federal income tax withholding
Optional (nanny can choose)
State income tax withholding
Varies by state
Workers' comp insurance (CO: required 40+ hrs)
~$400–800/yr
These taxes are reported on Schedule H, filed with your personal tax return each year. A payroll service handles all of this, you don't need to know the details, just find a good partner.
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GOOD NEWS FOR FAMILIES
The Dependent Care FSA allows you to set aside up to $5,000 pre-tax per household for childcare expenses which can offset much of your payroll tax cost. Ask your payroll provider about this.
TRUSTED PAYROLL PARTNERS
Two services we recommend
to every Cherry Creek family.
We've vetted both of these services and recommend them with confidence. Both specialize in household employment, unlike general payroll companies, they know the specific rules that apply to nannies and domestic workers.
GTM Payroll Services
Full-service household payroll & HR — used by Cherry Creek families
⭐ CHERRY CREEK PARTNER
GTM is our primary payroll partner and the service we refer most frequently to families placing through Cherry Creek. They specialize exclusively in household employment and offer end-to-end payroll, tax filing, HR support, and even workers' compensation insurance, all in one place.
✓ Full-service payroll processing — automatic, every pay period
✓ Federal and state tax filing included
✓ W-2 preparation and delivery at year end
✓ Workers' comp insurance required in Colorado, bundled in
✓ New hire reporting and HR compliance support
✓ Dedicated household payroll specialists
✓ Online portal for employers and nannies
✓ Direct deposit for your nanny
You'll be taken to GTM's site via our agency partner link. Cherry Creek Nanny Agency may receive a referral fee at no cost to you.
HomeWork Solutions
The original household payroll service — 500k+ tax returns filed
✓ AGENCY VETTED SINCE 1993
HomeWork Solutions has been the leading household payroll service in the country since 1993, longer than almost anyone. They've processed over half a million household tax returns and are regularly cited by the Wall Street Journal and Kiplinger as the go-to source for nanny tax expertise. Three service tiers to fit any family's needs.
✓ Essential Tax — tax filing only, you run payroll
✓ Complete Payroll — full payroll processing + tax filing
✓ Premier Household — full service + QSEHRA health benefit guidance
✓ Live experts available Mon–Fri, no phone trees
✓ Free online nanny paycheck calculator
✓ FLSA-compliant compensation agreement templates
✓ Nanny share payroll ($120 off when both families enroll)
You'll be taken to HomeWork Solutions' site. Cherry Creek Nanny Agency may receive a referral fee at no cost to you.
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Not sure which to choose?
Both are excellent and our families have had great experiences with each. GTM is ideal if you want the most hands-off, all-inclusive experience. HomeWork Solutions is great if you'd like flexibility across three pricing tiers. Either way, both are a significant upgrade over doing it yourself or ignoring it entirely. Have questions? Ask us on your consultation call.
COMMON QUESTIONS
Nanny payroll FAQs.
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SERVING FAMILIES NATIONWIDE
Cherry Creek Nanny Agency places families in Denver, Chicago, New York, Dallas, Nashville, and Charlotte, with the same vetted, personalized approach in every market.
📍 Denver
📍 New York
📍 Chicago
📍 Dallas
📍 Nashville
📍Charlotte
📍 Oregon
📍 Utah
📍 Arizona
📍Atlanta
📍Florida
Don't see your city? Reach out — we may be able to help or expand to your area.