Tax Law (Questions About Taxes)/Nanny taxes


My wife recently became a full time nanny.  She has one main family that she works for and does side jobs when she has time.  The main family did not make her fill out any formal paperwork like a W2 or give her a 1099.  My tax questions are as follows:

1.  What is the proper way to handle paying income taxes in this situation?
2.  What calculation or amount should we set aside? (is there a formula based on amount of income)
3.  Is there a tax advantage to her incorporating and running her nanny jobs as a business?
4.  Can expenses like usage of the computer services and her purchasing materials for the kids she works with be written off?
   4a.  If so, how do you write something off, are there forms for that?

Any guidance or resources you can give for this situation would be greatly appreciated.  Thanks in advance for your time.



Thanks for your question.

1. You should report her earnings and related expenses on Schedule C. You will calculate the self-employment taxes on Schedule SE.  

2. Determine her estimated profit for the quarter and figure the amount of tax on that profit.  Use your marginal tax rate for the income tax part and 13.45% of her profit for the self-employment taxes.  Depending on your state of residence, don't forget state income taxes and you would need to make an estimated payment for those to the state.

3. Incorporating would introduce complexity and not much in tax savings.  However, you might wish for form an LLC for the liability protection.  Report the LLC as a Schedule C business, so nothing changes as far as taxes is concerned.

4. As mentioned in 1, you can deduct expenses related to the business on Schedule C.

Hope this helps.

John Stancil, CPA

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John Stancil, CPA


I can answer questions on personal income taxes, partnerships, and some corporate income taxes. I can deal with some state tax questions. Limited gift and estate tax questions. I am also familiar with ministerial and church tax reporting issues. I am Professor Emeritus at Florida Southern College. Sales taxes and property taxes are state and local issues so I am not likely be be able to give you an in depth answer on those types of taxes. I have maintained a CPA practice, specializing in tax, for over 35 years. I am a member of the National Association of Tax Professionals, The Florida Insititute of CPA's, The NCPE Fellowship. In addition I am a Certified Mentor for SCORE. Visit my website at I also offer seminars and consultations to churches and clergy on their tax issues at Also visit my blog, I am listed on Tax Connections at Prepare and file your own taxes at


I hold a doctorate in Accounting, and am a CPA. My certifications of CIA, CFM, and CMA are inactive. I passed all certification examinations on the first attempt, and received honorable mention for my scores on the CIA exam. I have operated a CPA firm for over 37 years and have taught accounting and tax at the college level for over 35 years.

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