NASHVILLE, Tenn. (WKRN) — With long daycare waitlists and parents with non-traditional schedules, many families are choosing in-home nanny care. It’s convenient and personalized, but it’s costly.

Care.com reports the average hourly rate for nannies in Nashville is about $18/hour, which is about $37k a year for full-time care.

Jenn Woods has worked in childcare for more than 13 years, and now she has a child of her own.

“That showed a whole new side of the childcare shortage, if you will. And I decided to get back into nannying after I had my baby, who is one and a half,” said Woods.

She saw how great the demand was for providers in Nashville, and it was a job she could do without needing childcare for her daughter, Aubrey.

“I was looking for income, and I was looking to stay at home. And so I did what I did best. And I had a group of teachers come to me. And they needed help. So we we ended up doing what’s called a nanny share,” said Woods.

With a nanny share, a few families can come together and hire one nanny to care for their kids. That not only helps lower costs for families, but it also, helps increase pay for nannies.

In Tennessee, a caregiver can watch up to four unrelated children without needing a license from the state.

If you’re hiring a nanny to babysit in your house, Desiree Leung said there are some important legal things you need to know about paying the nanny. Leung is the head of operations for Care.com home pay.

“When you employ someone to work in your home, whether it be a nanny, babysitter or a cook, and you pay them more than $2,400 in the year, the IRS considers you to be a household employer. As such, the IRS requires that you pay taxes on wages paid and file the appropriate Federal and state tax returns.”

That means they are not an independent contractor who can receive an IRS 1099 form. They will need a W-2.

Household employers have to pay their share of medicare, social security and unemployment taxes. The nanny will have their portion taken out too.

“If you continue to pay under the table and you get caught, the family would have to pay double the back taxes, be subject to IRS fines, and then the most egregious of situations, they may actually risk losing professional licenses that they hold,” said Leung.

So, how would you get caught?

Leung answered, “It could be through an audit when you’re doing your personal taxes. It could also be when an employee goes to file for unemployment insurance taxes and they claim the family there they were working f

Care.com’s home pay and services like it, can help you get back on track if you haven’t been paying nanny taxes.

or the family. But, the IRS does not have record of those tax filings.”

“We help you to get caught up on the paperwork and the filings, and in many cases help you to negotiate against the penalties on the back taxes that you owed,” she said.

The service will also help you get registered with the IRS and do the tax work and payroll for you – at a cost of $75/month.

“We will calculate what needs to be withheld from your employees pay, as well as what you owe as the employer and then prepare the tax returns to file that with the state and the IRS,” Leung explained.

Paying legally will add about 10% on top of what you pay your nanny, but keep in mind, it will allow you to take advantage of the childcare tax credit.

“This can save the family more than $2,000 per year by using these tax breaks,” said Leung.

It also allows you to use up to $5,000 pre-tax from a flexible spending account (FSA).