• The Nanny Tax is a mandatory federal tax paid by people who employ domestic workers and pay wages above a certain threshold.

  • The IRS considers a permanent home helper to be a domestic worker, not an independent contractor.
  • The babysitter tax entitles domestic workers to receive certain benefits and protections such as Social Security, Medicare, and unemployment benefits.
  • Employers and employees pay an equal share of Social Security and Medicare taxes (total 7.65%) on cash wages.