When families first hire a nanny, one question comes up almost immediately: do I give them a W-2 or a 1099? The honest answer is that for a regular nanny, it's almost always a W-2 — and getting this wrong is one of the most expensive mistakes a household employer can make.

The difference in one sentence

A W-2 employee works under your direction; you control what work is done and how. A 1099 independent contractor runs their own business and controls their own methods. The IRS doesn't care what you call the arrangement — it looks at the reality of the relationship.

Issuing a 1099 to a nanny doesn't make them a contractor. If the IRS reclassifies the worker, you can be on the hook for back taxes, interest, and penalties — plus the taxes you should have withheld.

The test: who controls the work?

The IRS weighs behavioral control, financial control, and the type of relationship. For a nanny, nearly every factor points to employee status:

  • You set the schedule — the hours and days your nanny works.
  • You control the work — where it happens (your home) and how the kids are cared for.
  • You provide the tools — the home, the car seat, the supplies.
  • The relationship is ongoing, not a one-off project with a defined deliverable.
  • The nanny doesn't offer their services to the general public as an independent business while working for you.

By contrast, a self-employed provider — say, a daycare that takes many families' children on its own terms — sets its own rules. That's the line.

Why the W-2 route is actually better for you

  • No misclassification risk. You're doing it the way the law expects.
  • Your nanny builds a real work history — Social Security credits, and eligibility for unemployment if the job ends.
  • It can unlock tax breaks like the Child and Dependent Care Credit or a Dependent Care FSA, which generally require properly reported wages.
  • It's cleaner at tax time — a W-2 and Schedule H, rather than an argument with the IRS.
A rare exception: a truly occasional, casual babysitter who sets their own terms may be self-employed. But your regular, scheduled nanny is an employee.

House is built for W-2 household payroll — it withholds correctly and produces the W-2 and Schedule H figures at year-end.

Do it the right way

The bottom line

If you control when, where, and how your nanny works — which you almost certainly do — they're a W-2 employee. Treat them like one from day one. It protects you, it's better for your nanny, and it's far simpler than untangling a misclassification later.