Long gone are the days of writing paper checks to pay nannies — or even handing them a stack of cash. In today’s child care market, most families who employ professional nannies opt for digital payment options. Not only are these services generally reliable, but they can also make it easier to track payments and taxes for both nannies and their employers.
Conversations about money can be tricky, but professional child care providers working in private homes do need to pay taxes. It is the responsibility of the employer to set up nanny payroll taxes, but it is important for nannies to also follow the correct steps — including filing the correct forms and reporting hours and income. Even nannies who are paid “under the table” are still legally required to pay taxes on that income.
Some families choose Venmo to pay nannies. “Venmo is not only a quick and convenient way to pay but also secure and makes it easy to track payments all in one place,” a Venmo representative explains. That said, if you are considering using Venmo to handle nanny pay, there are some important guidelines and tax considerations to know.
How do employers pay nannies via Venmo?
Venmo is an app-based payment platform, similar to PayPal (its parent company) and CashApp. By linking a payment method to the app, parents can instantly transfer funds to their nanny in a secure manner. Nannies can then choose to transfer the money to their own bank, keep it in Venmo or spend it using a Venmo debit card.
Venmo gives users a clear and detailed report of all payments made to specific users. “Families can simply pay using their balance or other linked payment methods so there’s no need to have cash or a check on hand,” a Venmo representative explains.
“Venmo itself does not tax nanny services… Families and nannies should be aware of reporting thresholds to ensure proper tax compliances.”
— Jennifer M. Cail, small business accounting consultant, Medrano & Cail
Emily Parker-Woodland, a mom and marketing professional in Salem, Massachusetts, chooses to use Venmo to pay her nanny for several reasons. First and foremost, it’s simpler for their nanny. “Venmo seemed like the easiest option and allowed our nanny to transfer the money right away without needing to bring a check to the bank.”
Every two weeks, Parker-Woodland sends payment along with information about the taxes being withheld — which she keeps track of on a spreadsheet. “So far it has worked very well; we’ve had no issues.”
Does Venmo tax nanny services?
“Venmo itself does not tax nanny services,” says Jennifer M. Cail, a Naples, Florida-based small business accounting consultant at Medrano & Cail. It is a payment platform and not designed to be used as accounting software. “However, if a nanny receives $600 or more in payments via Venmo over the course of the year, Venmo is required to issue a 1099-K to the nanny to report the total amount received.”
Cail says it is important for nannies and employers to understand that this does not automatically determine how much the nanny owes in taxes. “It simply informs the IRS of the income. Families and nannies should be aware of reporting thresholds to ensure proper tax compliances.”
Income reporting thresholds for nannies
As Cail noted above, if a nanny is paid more than $600 per year, they are required to report that income to the IRS. If an employer pays a nanny more than $2,800 per year, then the employer is required to withhold federal and state taxes as well as Social Security and Medicaid taxes.
Nannies should be classified as W-2 employees, which means they have 7.65% of their gross wages withheld. Their employer should also pay a matching 7.65% to the IRS.
“Misclassifying a nanny as an independent contractor instead of a household employee can result in serious penalties from the IRS, including back taxes, interest and fines,” cautions Cail. “Most nannies are considered household employees because the family dictates their schedule, duties, and work conditions.”
It’s important to classify nannies as W-2 employees to avoid legal and financial ramifications.
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How do nannies report income received via Venmo?
For nannies receiving more than $2,800 in income per year, their employer should issue a W-2. If the nanny has classified themself as an independent contractor on Venmo, Venmo may also generate a 1099-NEC, but this is not the correct classification for a household employee. If a nanny does receive a 1099-NEC and cannot resolve the issue with their employer, they are required to self-report their income to the IRS.
“Using Venmo without proper documentation can make it harder to demonstrate compliance with tax laws,” says Cail. Venmo does allow nannies and employers to export transaction history for tax purposes, but “exporting these for tax purposes can be cumbersome without proper categorization,” adds Cail.
When in doubt, employ the services of a tax professional to ensure all nanny payments are legal and ethical.
Can employers use Venmo with other payroll services?
Venmo is not designed to integrate with other payroll services, according to a company represetative; however, some employers do use a secondary service to keep track of withholdings and payments, using Venmo to actually send the funds. “Some payroll systems allow employers to use Venmo as a payment method to pay their nanny,” explains Cail.
That does not mean Venmo alone will withhold or remit any taxes for the IRS. “When integrated with a payroll system, Venmo can handle the transfer of funds [only], but the payroll system itself is responsible for tracking wages, withholding taxes and preparing necessary tax forms.”
It is up to families to choose a payroll platform that is compliant with household employer tax laws. Some of the most popular payroll programs include:
- HomePay.
- Nanny Payroll by ADP.
- QuickBooks.
Does Venmo have payment limits or other restrictions?
In short, yes. Employers need to take note of Venmo’s payment limits so that nannies are not left waiting for compensation.
Venmo weekly transfer limits
| Account type | Venmo direct transfer limit | Bank transfer limit |
| Personal unverified | $299.99 | $999.99 |
| Personal verified | $7,000 | $19,999 |
| Business unverified | $2,499 | $999 |
| Business verified | $24,999 | $49,999 |
What are the benefits of getting paid with Venmo?
“Venmo is a convenient way to pay nannies because it allows families to transfer funds quickly and directly,” says Cail. It’s also a platform many folks are familiar with and trust.
The company itself provides payment protection that is more secure than cash or paper check nanny payments — just check your settings. “Venmo offers a clear way for a sender to mark a payment as a Goods and Service transaction in the app, extending both the buyer and seller purchase protection on eligible payments that may not go as planned,” says a representative from the company.
Parker-Woodland adds that they toggled the Venmo settings out of privacy concerns. “I mark the payments as private just so everyone can’t see all that info. [The nanny] never asked me to, I just did it.”
What are the drawbacks of paying nannies with Venmo?
While Venmo is a secure way to handle nanny pay that many people are familiar with, there are some drawbacks that users and professionals report.
Parker-Woodland says it takes a good deal of time to manage the forms, tracking and reporting required to pay their nanny. “The tax process is not easy,” she says. Thankfully, her mom is well-versed in tax law after working in payroll for much of her career. “She had never done this type of payroll before, for a household employee, and it is a bit different… I don’t know how people figure all this out without help.”
Additionally, both nannies and employers need to be aware of the potential for nannies to be misclassified as independent contractors and the need to carefully track transaction histories.
The bottom line
With so many options available for paying nannies, the choice can be overwhelming. Venmo is a safe and secure payment platform that comes with benefits and drawbacks. At the end of the day, Cail says it all comes down to organization and documentation — whatever platform you choose.
Beyond the legal ramifications of paying household staff incorrectly, it is also important for employers to keep clear documentation so they can also access child care tax credits or submit child care costs to FSA accounts. “Keeping clear and consistent records is essential for claiming these tax benefits.”
