First counsel her not to assume her employers are tax evaders, or to rely on a tax preparer with that attitude.  It's just as likely that the employers will be counseled on filing Schedule H when they get around to doing their tax returns.  The  4852 is a "turn in your employer to IRS" form, and it would have been in the best interest of the kids to settle this issue before she started work.  For now, maybe you'll pick up a new client when the boss wants to do the right thing.  

By "nanny," do you mean that this was a live-in arrangement, and she was not taking care of other children as well?