I understand that the rule in NYS is to pay your nanny with a W2.  I guess the taxpayer would have to get an EIN# and put the nanny's wages and payroll taxes on the Schedule C.  It just seems funny to me to have only that expense.  I would think the IRS would question it, even though it's legitimate.  Is there another way to deduct the W2 wages for the employer.  This couples combine W2's are between 6-7 figures.  They don't quality for any credit or deduction because of their income. Suggestions PLEASE!!!