Managing Nanny Taxes in Oregon

January 7, 2025

Paying your nanny and filing taxes can be one of the trickiest parts of being a household employer. Aligning with all of the state and federal requirements requires diligence – The IRS estimates that the average family will spend 55 hours a year managing employment taxes, filing returns, and running payroll.

To save our clients time, we’ve partnered with HomePay, a comprehensive tax and payroll service. HomePay can handle all of your obligations as a household employer and provide a hands-free solution to paying your nanny. As a Pearl Nannies client, you’ll receive your first month of HomePay service free. Learn more here.

We have an affiliate partnership with HomePay. We chose HomePay as our household payroll partner for their responsive support staff and their service guarantees. If HomePay doesn’t meet your expectations during your first six months of use, they will refund your payments for their services. HomePay also guarantees your tax returns will be filed accurately and on time. We endorse HomePay because we believe in the quality of service they provide.

If you’re interested in managing your own payroll and nanny taxes in Oregon, here’s what you need to know:

What are nanny taxes?

Household employment taxes, or “nanny taxes,” are a combination of federal and state tax requirements detailed in IRS Publication 926 that families must manage when they hire a nanny or any other household employee. The taxes include:

Taxes withheld from the employee: Social Security & Medicare taxes (FICA), and federal & state income taxes.
Taxes paid by the employer: Social Security & Medicare taxes, and federal & state unemployment insurance.

For the 2025 tax year, if you pay your nanny $2,800 or more in the calendar year, you are legally obligated to pay employment taxes. In Oregon, you are required to pay employment taxes when you pay an employee wages of $1,000 or more in a calendar quarter.

Why are nannies considered household employees?

According to the IRS, a nanny is an employee if you control what work is done and how it is done. Basically, that means the nanny is coming to your home on your schedule and following your instruction. Whether the work is full-time, part-time, or occasional, if you pay your nanny more than $2,800 in a calendar year, they are your employee and you must pay employment taxes.

Why should I pay nanny taxes?

Proper tax withholding and reporting is beneficial for both nannies and families. The family can receive tax breaks to offset the cost of employer taxes, like a Dependent Care FSA and a Child Care Tax Credit. The nanny receives a traceable employment history, unemployment insurance benefits, Social Security and Medicare credits, and healthcare subsidies. In addition to these tangible benefits, you will both receive peace of mind by knowing you’re maintaining a legal employment relationship.

How do I pay nanny taxes in Oregon?

There are four main tasks a household employer in Oregon must take care of:

Apply for Tax ID Numbers: A family needs both federal and state tax identification numbers in order to report their nanny paid wages and taxes. You can get a federal employer identification number from the IRS, and you can get your Oregon business identification number from the Oregon Department of Revenue Online.
Calculate and track payroll: Accurately calculate your nanny’s gross pay, the taxes withheld from their pay, and your corresponding employer taxes each pay period. You legally need to withhold FICA taxes, and it is best practice to withhold federal and state income taxes as well unless your nanny specifically requests otherwise. Use this nanny payroll calculator from HomePay to calculate what you should be paying and withholding. You must also provide a pay stub each pay period detailing pay and taxes withheld.
File tax returns year-round: On a quarterly basis, you will need to file state tax returns with the Oregon Employment Department using forms OQ and 132. Estimated tax payments should also be sent to the IRS four times per year using form 1040-ES – For calendar year taxpayers (which is most individuals), the due dates are April 15th, June 15th, September 15th, and January 15th of the following year.
Complete year-end tax forms:
- Provide your nanny with a Form W-2 each calendar year by the end of January.
- The Social Security Administration requires you to file Form W-3. This lets them know that you’ve properly withheld FICA taxes from your nanny and withheld FICA taxes of your own throughout the year.
- Prepare a Schedule H form and file it with your federal income tax return.
- File an Annual Reconciliation Report with the Oregon Department of Revenue, which summarizes the state income taxes you withheld from your nanny. File your report using form OR-WR.

When you sign up for HomePay’s household payroll and tax service, they will handle or assist you with each of these tasks to ensure that you’re in compliance. Learn more about what services HomePay provides here.

What does a nanny need to provide for payroll and tax withholding?

Before employment begins, a nanny needs to provide three things:

A social security number, or an ITIN if they are a non-resident
A completed Form I-9 with proper identification
A completed Form W-4 and a corresponding state income tax withholding form (if you live in a state with income taxes).

At Pearl Nannies, we’ll ensure timely completion and submission of these documents before your nanny starts.

If managing your own employment taxes and payroll sounds overwhelming, consider signing up for a payroll company like HomePay. They will manage your employment taxes and forms for you, as well as run a payroll and pay your nanny on a regular basis for just $75 a month. Claim your free first month of service here.

The information provided in this blog post is intended for general informational purposes only and is not legal or tax advice. While we strive to ensure the accuracy of our content, tax laws and regulations are subject to change. We recommend consulting with a qualified tax professional or accountant to ensure compliance with federal, state, and local tax requirements. Pearl Nannies is not responsible for any errors or omissions, or for any consequences arising from the use of this information.

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