Bank Statement for Nanny Tax Compliance

If you pay a nanny, housekeeper, or caregiver above the IRS threshold, you owe household employment taxes — the nanny tax — and must report them on Schedule H. Bank statements document the wages you paid, which is the foundation for calculating Social Security, Medicare, and unemployment tax owed. This guide covers what to track.

Key Benefits

• Documents the wages paid to your household employee each pay period
• Supports the Schedule H calculation of Social Security and Medicare tax
• Provides the payment record if the IRS or state questions your filing
• Helps reconcile year-end totals for the employee's W-2

How It Works

1. Step 1: Download statements showing the payments to your household employee as PDFs
2. Step 2: Convert them to Excel with Bank Statement Converter to total wages by quarter and year
3. Step 3: Apply the Social Security, Medicare, and FUTA rates to the wage totals
4. Step 4: Use the totals to complete Schedule H and issue the employee's W-2

Frequently Asked Questions

When do I owe nanny tax?

When you pay a household employee more than the IRS annual threshold in cash wages — at that point you owe Social Security, Medicare, and often federal and state unemployment tax.

How do bank statements help with nanny tax?

They document exactly what you paid and when, which is essential for calculating the taxes owed on Schedule H and preparing an accurate W-2 for your employee.

What is Schedule H?

The form filed with your personal tax return to report household employment taxes — the wage totals from your bank statements feed directly into it.

Is a nanny an employee or independent contractor?

Almost always an employee, since you control how and when the work is done — misclassifying a nanny as a contractor to avoid the nanny tax is a common and risky mistake.

Convert Your Nanny Tax Statements