Private Household Staff Payroll: Schedule H, Nanny Tax & W-2 Guide (2026)

You hired a nanny last month and someone just mentioned "nanny tax." Now you're googling at midnight wondering if you accidentally became a business. Here's the short answer: if you paid that nanny $2,800 or more in 2026, yes — you're a household employer, and the IRS expects you to act like one.

Private household staff payroll doesn't have to be complicated. But ignoring it is expensive. Here's exactly what you need to do.

Who Counts as a Household Employee (And When You're Legally an Employer)

The IRS uses one core test: do you control what the person does and how they do it? If yes, they're your employee — not a contractor. That applies to nannies, housekeepers, senior care aides, private chefs, gardeners, and drivers. The $2,800 threshold (2026 figure) is when federal obligations kick in.

A cleaning company that sends different staff each week and sets their own methods? Contractor. A housekeeper who shows up every Tuesday at 9am because you require it and uses your vacuum? Employee.

The 4 Tax Obligations Every Household Employer Must Handle

Household employers owe FICA + FUTA and report everything via Schedule H on their personal tax return — no separate business filing needed.

1. 1
   Get an EIN (Employer Identification Number)
   Free, takes about five minutes at IRS.gov. You need this before you can file anything. Don't skip it — without an EIN you can't run payroll legally. See our household employer registration walkthrough if you want a step-by-step breakdown of the process.
2. 2
   Withhold and Pay FICA
   Social Security (6.2%) + Medicare (1.45%) = 7.65% from the employee's wages. You match that exact amount out of your own pocket. On a $40,000 annual salary, you each owe $3,060 — $6,120 total.
3. 3
   Pay FUTA (Federal Unemployment Tax)
   The stated rate is 6% on the first $7,000 in wages — a maximum of $420 per employee per year. However, most employers qualify for a 5.4% credit when state unemployment taxes are paid on time, reducing the effective federal rate to just 0.6% (max $42 per employee). You only owe FUTA at all if you paid $1,000 or more in any calendar quarter. Employees don't contribute to this one. Most states also have their own unemployment tax — check your state's labor agency website.
4. 4
   File Schedule H With Your Form 1040
   This is the form household employers use to report everything — FICA, FUTA, and any federal income tax withheld. It attaches directly to your personal tax return, due by the April filing deadline. No separate business return, no quarterly payroll deposits required for most household employers.

Jennifer, a Houston mom who hired a live-in nanny in early 2025, didn't realize she owed employer FICA until her accountant flagged it at tax time. The bill: $3,800 in back employment taxes plus a late penalty. Getting it right from month one would have cost her $300/quarter.

Your Household Worker Gets a W-2 — Here's How to File It Right

Every household employee earning $2,800+ gets a W-2 by January 31. Same form, same deadline as any employer. Three boxes matter most: Box 1 (total taxable wages), Boxes 3 & 4 (Social Security wages and withheld tax), and Boxes 5 & 6 (Medicare wages and withheld tax). File Copy A with the Social Security Administration by January 31 as well. For a field-by-field breakdown of what goes where, our W-2 filing guide for household employers covers the most common reporting mistakes.

The most common mistake? Paying in cash and skipping the W-2. The IRS can assess back taxes, penalties, and interest — and your employee loses out on Social Security credits. It's not worth the risk.

Stop Wrestling With Payroll Software Built for Businesses

Honestly, most payroll platforms are overkill for a household employer. They're priced for businesses with HR teams, not for someone paying one nanny or a part-time housekeeper.

PayHRoll is built for exactly this situation — 1 to 10 employees, simple needs, no corporate complexity. FICA calculations are handled automatically, pay stubs are generated each pay period, and W-2 prep is included at year end.

Frequently Asked Questions

Do I need to do payroll if I only pay my nanny $500 a month?

If your total annual payments reach $2,800 or more in 2026, federal nanny tax rules apply and you must run payroll. Below that threshold, federal payroll taxes don't kick in — but check your state's rules, since some states have lower thresholds.

What is Schedule H and when do I file it?

Schedule H is the IRS form household employers use to report and pay employment taxes — FICA and FUTA — for domestic workers. You attach it directly to your personal Form 1040 and file by the April tax deadline. Our Schedule H explainer walks through every line if you want more detail. No separate business return is needed.

Can I pay my housekeeper as an independent contractor to avoid payroll taxes?

Only if they genuinely control how and when they work and serve multiple clients independently. If you set the schedule, direct the work, and they work exclusively for you — the IRS classifies them as an employee regardless of what you call them. Misclassification can trigger back taxes, penalties, and interest going back multiple years.

How do I generate a W-2 for my household employee?

You'll need your EIN, the employee's Social Security number, and totals for wages paid and taxes withheld across the calendar year. The SSA's free Business Services Online portal lets you file W-2s directly — or use payroll software that handles the form for you and files Copy A automatically by the January 31 deadline.

Conclusion

Household employer tax obligations are real, but they're not complicated once you know the four steps: EIN, FICA, FUTA, Schedule H. The penalty for ignoring them — as Jennifer found out — is always higher than the cost of doing it right from day one. Get your EIN, run each paycheck correctly, and by January 31 you'll have a W-2 ready instead of a tax bill.