A. No. Parents are legally allowed, but not required, to withhold federal income taxes from a nanny’s wages. (Note: Federal income tax is NOT the same as Social Security and Medicare taxes.)
Some parents withhold federal income tax as a courtesy. Some nannies, however, prefer to be fully responsible for paying their own income taxes. A good nanny contract should alert parents to this option, allowing an informed choice.
If parents decide to withhold a nanny’s federal income taxes, the nanny needs to complete and give the parents IRS Form W-4. For states that have income taxes, the nanny should also complete the equivalent state form, which can usually be downloaded from the state’s department of revenue or taxation.