[static_motion]

Non-US citizen here: you have to declare what you paid the nanny to the IRS? Where I'm from, only the receiving end of the money needs to declare how much they earned. The only reason we file expenses is for tax deductions. The US tax system has always seemed so hostilely complex to me.

[nkrisc]

It’s worse than that. For example we were also supposed to withhold 50% of the social security tax that the employee is responsible for, or if we pay the full amount for them (which we did because we didn’t know we were supposed to withold that), then we have to declare that as additional income for the employee, and more I’m sure I’m forgetting because I started to lose it at that point.

[headsman771]

You don't have to do any of that. Its their job to report income and pay taxes. Withholdings are a "convenience" not a requirement. Furthermore you weren't their employer, they provided a service to you.