Taxes, Bonuses, and PTO Made Simple

As the year comes to a close, families who employ a nanny have a few important payroll tasks to wrap up. Taking care of these details now helps you stay compliant with tax laws—and supports a positive, professional relationship with your nanny.

From tax forms to bonuses and unused paid time off, here’s what to know as you close out the year and prepare for the next.

Year-End Tax Tasks You Shouldn’t Miss

Schedule H

If you pay your nanny legally, you’ll need to file Schedule H with your personal tax return. This form summarizes:

• Total wages paid
• Social Security and Medicare taxes
• Federal unemployment taxes

Keeping accurate payroll records throughout the year makes this step much easier and helps you avoid common tax mistakes. This fits into your broader understanding of why employers have legal responsibilities when hiring a nanny. 

W-2 and W-3 Forms

By January 31, you must:

• Give your nanny a W-2 showing their yearly wages and taxes
• File a W-3 with the Social Security Administration

Even if you use a payroll service, the responsibility ultimately falls on you as the employer.

Confirm Your Nanny’s Information

Before forms are issued, double-check:

• Legal name
• Current address
• Social Security number

This helps prevent delays or tax errors.

Year-End Bonuses: What to Know

Many families choose to give a year-end bonus to show appreciation—and it’s a wonderful gesture. Bonuses count as taxable income and must be reported with your year-end payroll.

Bonuses are subject to:

• Social Security & Medicare taxes
  
• Federal & state income tax withholding (if applicable)
  
• Employer-paid unemployment taxes
  

Be sure bonus amounts are included in total wages for reporting.

For related ideas on how to appreciate your nanny, see Holiday Bonuses & Appreciation: How to Thank Your Nanny This Season. 

Reviewing Paid Time Off (PTO)

Year-end is the right time to review your PTO policy and balances.

Check Your Agreement

Look at your contract to confirm whether unused PTO:

• Expires at year-end
• Rolls over into the new year
• Is paid out

Make sure your policy follows your state’s labor laws.

Calculate Remaining PTO

Review:

• Total PTO earned
• Time already used
• Remaining balance

Clear records help avoid confusion.

Handling Unused PTO

Depending on your policy:

• Roll over allowed hours
• Pay out unused time (as taxable wages)
• Give notice if PTO will expire

Communicate clearly so your nanny knows what to expect.

Planning for the New Year

Pay and Benefit Updates

The end of the year is a good time to review:

• Hourly rate or salary increases
  
• PTO accrual changes
  
• Mileage or benefit adjustments
  

For ideas on fair compensation and rewarding your nanny, check out How Much of a Raise Should I Give My Nanny? — which discusses raises, bonuses, and long-term retention strategies. 

Always put changes in writing and note when they take effect.

Schedule Changes

If your family’s needs are changing, discuss schedule updates early. Advance notice helps everyone plan.

Keep Communication Clear

Consider holding a short year-end meeting to review:

• Bonuses and timing
  
• PTO balances
  
• Tax form delivery
  
• Any changes for the new year
  

Open communication keeps expectations aligned and builds trust.

For broader guidance on building strong employer-caregiver communication and relationships, 5 Aspects You Always See in the Most Successful Nanny Placements offers helpful context. 

Making It Easier Next Year

To simplify future year-end tasks:

• Use a household payroll service
• Consult a tax professional familiar with nanny taxes
• Track payroll and PTO digitally
• Set calendar reminders for tax deadlines

A little organization now saves stress later.

Need Help Navigating Nanny Payroll?

Managing household employment can feel overwhelming—but you don’t have to do it alone. Seattle Nanny Network supports families with guidance on nanny payroll, taxes, and employment best practices.

We’re here to help you stay compliant while building a strong, respectful relationship with your nanny.

Contact Seattle Nanny Network today to get expert support and start the new year with confidence.