Hiring a Nanny: What You Need to Know

Most local schools are out for summer this week. While kids everywhere are rejoicing, working parents are faced with the issue of summer childcare.

If you’re thinking of hiring a nanny this summer, there are several important factors to consider:

Taxes
If you hire a nanny, you should think of them as an employee, as far as taxes go. The IRS has criteria to help you determine who is and isn’t an employee, which can be found on their website. If your housekeeper or nanny is your employee, you are responsible for verifying their employment eligibility and paying employment taxes. Don’t make the mistake of thinking your nanny’s pay is “under the table” — check the IRS website to confirm all the details.

Worker’s Comp
Most employees are eligible for certain benefits, such as worker’s compensation. Laws vary by state, but most states do not require worker’s comp for nannies. However, it could be beneficial to consider adding a policy. For example, you can purchase a worker’s compensation policy to cover your household employees, which could provide you with some immunity from having your employee take action against you under most states worker’s compensation laws.

In most cases, your homeowner’s insurance policy actually provides all household employees with some medical payments if they were injured during the course of their work; however, it may not be enough to cover the extent of the injury. Purchasing a separate policy would give you peace of mind.

Auto Insurance
Will your nanny be chauffeuring your kids around in the family minivan? Generally, insurance covers the specific automobile, so your policy will cover any accidents your nanny may be involved in. (This is another argument in favor of a Worker’s Comp policy; that can help bridge any gaps in medical care.)

If the nanny will be using his/her own vehicle to drive your kids, be sure to have a copy of their insurance and license — and discuss what kind of policy they have. You want to be sure that their auto policy has appropriate amounts of coverage for your children in the event they are injured in an accident while in the nanny’s car.

Umbrella Coverage
Many insurance companies offer “umbrella” policies, in addition to auto/home insurance. These policies are more comprehensive than most, and would be a good thing to bring up to your agent.

Insurance is here to help -- if you’re hiring in-home help this summer, be sure to give your agent a call to discuss what you need to know!

Source: Irs.gov, Household Employees (https://www.irs.gov/publications/p926/ar02.html) | Trusted Choice, A Little Less than Supercalifragilisticexpialidocious: Insurance and Tax Issues with Nannies and Housekeepers.

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