Can anyone in the US give me some guidance on how to handle keeping track of payments and reporting childcare costs for taxes? We have a part time nanny that we've been paying cash. I now realize she's making enough to claim, and for legal reasons, I need to set it all up for 2015.

We were thinking of offering her a 25% raise to make the difference of what she'll have to pay in taxes.

Do you use a service for paying your babysitter or nanny? This seems appealing so I don't have to worry about keeping track or dealing with the w2 (I don't even know how to go about doing that).

I imagine the conversation will go over well, I just need to have my information in order.

Any tips would be so appreciated!