Nannies are considered Household Employees by the IRS and should be paid "on the books" and provided a W-2 for taxes. Nannies can not be legally paid as an independent contractor. At Your Happy Nest, we require all families who work with our agency to pay their nannies legally. Your Happy Nest has partnered with two payroll services to help you with all of your nanny payroll and tax needs! Take a look at the links below which have great information listed by state. These companies are the experts in household taxes and are happy to answer any questions you may have!