Finding a nanny is a little like finding a husband. It’s all about chemistry and you have to be patient and willing to wait for the right person to come along. It’s also one of the most nerve-wracking things you will do as a parent. Many of you contacted me to say how helpful my post on the nanny tax was and wanted to know how I chose my nanny. This post is for you.

When making the decision to hire a nanny you may have in mind a cross between Mary Poppins and Nanny McPhee. Or perhaps you envision a sweet woman in her fifties named Olga who knows how to cure childhood ailments with home remedies, teaches your child French and flawless table manners. The reality is that nannies come from a variety of backgrounds and there is no one “ideal” — only someone who is the right match for your family. We’ve had our nanny Eva, since D2 was three months old. He adores her. We adore her. And I feel very blessed to have found someone who cares as much for my son as I do. I started my search for a nanny while I was out on maternity leave and the stress of recovering from a C-section and trying to find someone just a few short months before going back to work  was nearly too much for me. Looking back there was so much I wish I had known. If you are serious about hiring a nanny, here are a few tips to get you started:

Step 1: Figure out if you can afford it. Nanny salaries vary dramatically by region and by the experience of the candidate. I live in the Southeast where salaries for a live out nanny start on the low end at about $450 per week for one child and $650 per week for two – three children. While paying health insurance is not required, it’s a nice benefit and gives you access to a broader pool of experienced career nannies. Regardless of what you pay your nanny, you will need to file employee taxes on her. Yes, many people get away with not paying taxes on their nanny but you should know it’s illegal not to do so. So figure this into your budget calculations. Your taxes will vary depending on your nanny’s salary. Mine run about $1,000 per quarter. Check out my past columns on the nanny tax for more detailed information on filing employee taxes or check out a site like 4Nannytaxes.com . One option that is becoming increasingly popular for couples who would like a nanny but can’t afford it on their own is a nanny share. This is where you and another family would hire a nanny to watch both of your children at one of your houses. As the economy has dried up disposable incomes, more nannies are becoming open to a nanny share arrangement.

Step 2: Think about the attributes and qualifications of your ideal candidate. Make a list of must haves and nice-to-haves for your nanny. A non-smoker and CPR and first aid certification (or a willingness to get it) were on my must-have list. Do you have a special needs child? You’ll want a nanny with some experience in this area. Are you hopeless at crafts and want your children not to miss out on this childhood perk? Put that skill on your list. You’ll find some nannies love infants and prefer to start with a family whose children are very small while others only want to work with families whose children are toddler-aged or older. Nannies come with all kinds of backgrounds. Is a college degree a must? Some nannies may lack a college degree but have deep experience in caring for children. In short, get a clear picture of your must-haves and put together a wish list to prepare you for the next step.

Step 3: Create a job description. As an executive I hire people all of the time so it was second nature for me to create a job description when I started my search. I strongly recommend you do this as well as it a) will help you clarify in your own mind what you need your nanny to do; b) will help your candidates understand your expectations and c) you can use it as a check list when you are interviewing.  Here’s a typical short list of what a nanny will do:

• bathing babies or supervising baths for older children
• washing and ironing children’s clothes
• making baby food for your infant
• preparing meals and snacks for the children
• straightening up common areas used by the children
• cleaning and washing up after children’s meals
• shopping for children’s requirements
• transporting children to school and other activities

What shouldn’t a nanny do? Be your housekeeper. My rationale? Would you rather have your nanny scrubbing your toilets or giving her full attention to your tot? Enough said.

Step 4: Start your search. Once you get your job description together, get going! Give yourself at least three to five months for your search. There a number of on-line membership-based nanny search agencies like Nannies4hire.com. In urban centers like New York City and Chicago, nanny agencies and services abound. You will (natch) have to pay them a fee but the advantage is they will pre-screen a pool of applicants who meet your requirements, help you with all of the necessary paper work and conduct that all-important multi-state criminal background check. A nanny agency is ideal also if you are short on time and need to get someone onboard stat. In my area, there weren’t any good agencies to work with so I placed an ad on Care.com, SitterCity.com and Craig’s list.  I know. I know. You are probably thinking, “Craig’s list?! Is she insane?” I did it (albeit reluctantly) at the suggestion of a friend who found her family’s nanny this way as did a number of her friends.  To my surprise, I met a number of fabulous candidates. You may also find, as I did, that many women looking for nanny engagements will post on all three boards to maximize their exposure.

I received about twenty inquiries from my Craig’s list ad, of which five met my qualifications and another 10 from Care.com – all of which met my requirements. As with any job search, ask your candidates to email their resumes to a special email box you set up just for this purpose. I started a nanny search file and as I received responses, I sorted resumes into Yes, No and Maybe piles.

Step 5: Interview your candidates. If you are conducting your own nanny search, I highly recommend you first phone screen your best applicants. This will allow you to ask questions about their work history, get a basic sense of their personality and check them out in general.  I love this nanny interview sheet from Baby Center.com. Be sure to ask if they would be willing to submit to a drug and background check. If you like what you hear, invite them to meet you in a neutral location like a coffee shop. Did she show up on time? Was she neatly dressed? Is her philosophy about childrearing in tune with yours? Is she able to provide at least at least three (preferably five) references you can check? Did you feel comfortable  around her? You’ll also want to understand her salary expectations as well as her general availability to start should you select her. I recommend doing three to five such second-round interviews, more if you have the stamina.  By the time you complete your second screening, you should have a pretty good feel for your candidate(s) and whether she has the right chemistry for your family.

If your in-person interviews went great, you are ready for the home visit. You can check references at this point or wait until after the visit.  Check back tomorrow for part 2 of this post on managing the home visit and hiring and on-boarding your new nanny.

Zoe Baird. Kimba Wood. Sound familiar? Both of these  prominent women were nominated for high-level political appointments only to see their nominations torpedoed due to not paying taxes on their household help. It’s a common story these days; many families either don’t know about the so-called ‘nanny tax’ or simply choose not to pay it. After all, no one really pays these taxes right? Well, you may want to reconsider. Last winter while out on maternity leave, I hired D2′s amazing nanny, Eve. I quickly received an education from Bonnie Yormack, my wonderful accountant of 10+ years, about my tax obligations for D2′s childcare. Not only is Bonnie principal and owner of  New York-based Lynn-Mark Tax & Business Consultants, she’s a working mom to boot and understands the financial challenges of raising a family.  My biggest question for Bonnie at the outset was, “Do I really have to pay this?” The answer was yes. Not only is it the right thing to do. It’s the legal thing to do. I admit I was more than a little overwhelmed and intimidated by the process but Bonnie quickly got me on the right track. With tax season right around the corner, I thought it good timing to sit down with her to clear up the confusion about the nanny tax – what it is, what your obligations are as a tax payer and how to pay it.  This is the first of two posts that I hope will shed some light and help you make your own decision come tax time. (Small disclaimer: this is general information and it goes without saying you should always consult your accountant about your situation.)

What exactly is the “nanny tax” and who is obligated to pay it?
In general, the Internal Revenue Service requires payroll tax filings by a household employer (sometimes called domestic employer by the IRS) who pays a household employee more than $1700 (2011) cash wages in a calendar year. These nanny payroll taxes are collectively referred to as “nanny taxes”.

As an employer, your nanny payroll tax obligations may include:

• Social Security & Medicare Taxes (7.65% of Gross Wages) [FICA taxes]
• Federal Unemployment Tax (FUTA) (0.8% of Gross Wages or less in Most Circumstances)
• State unemployment and disability insurance taxes levied on the employer.
• Possible workers comp and disability may be required by your home state.

If my family employs a  part-time babysitter to watch my children every day after school, should I be concerned about paying employee taxes? What if I am utilizing other domestic services like housekeeping or elder care? Am I required to pay taxes on these individuals as well?

Yes. Any individual you employ to provide services in your home whom you pay directly AND whose total payments in the calendar year meets the IRS household employment threshold ($1700 in 2011) must receive a W-2 from the employer (your family) and you the employer must pay the payroll taxes. So this includes:

• Social Security & Medicare Taxes (15.3% of Gross Wages – employer may collect 7.65% from the employee via deductions. For 2011 ONLY, the household employee’s contribution to Social Security & Medicare Taxes is reduced to 5.65%. Employer contribution remains the same.)
• State Unemployment Taxes where required.
• Federal Unemployment Tax (FUTA) where required.

It’s also important to note that as the employer, you are responsible for paying Social Security and Medicare taxes. If you don’t collect this tax from your employee through periodic payroll deductions, you are still responsible for  paying the tax to the IRS. Your employee (in this case your nanny)  CANNOT pay her share of Social Security and Medicare tax for you. You must do this.

If my nanny is not a legal US resident, should I still pay taxes on her?

Yes. According to the The Internal Revenue Code, the immigration status of your nanny or other employee has no bearing on your obligation for employment taxes. The IRS requires that workers ineligible for Social Security Numbers file Form W-7 to request an Individual Taxpayer Identification Number (ITIN). This number will be used on all tax reports and returns, including Form W-2.

If my nanny offers to file her own taxes is this okay?

As the household employer, you are obligated to remit your nanny’s taxes to the IRS. However, if she offers to pay her fair share of the Social Security and Medicare, and possibly Federal and state taxes, what you can do is deduct her share of employee taxes from her net pay.

Next post I’ll discuss how to pay the nanny tax and where you can get more information to help you determine what’s right for your family.