Are Payroll Services Right for You?

Family child care providers who hire someone to help them care for children must treat this person as their employee.

This means you must withhold Social Security/Medicare taxes, pay federal and state unemployment taxes, withhold federal and state income taxes and perhaps purchase workers’ compensation insurance.

The paperwork can be daunting to meet these requirements. To pay the Social Security/Medicare taxes you will have to file either IRS Form 941 or 944. To pay federal unemployment taxes you must file IRS Form 940.

Before a person can work for you they must fill out IRS Form W-4 and you must fill out the immigration form I-9. At the end of the year you must also file IRS Form W-2 and W-3. In addition, there are state unemployment tax forms to file. Some states may have additional payroll tax forms to file.

In addition, you will probably have to purchase workers’ compensation insurance.

If you hire your spouse or own children you will probably not owe federal or state unemployment taxes, but you may owe all other taxes (and may need to get workers’ compensation insurance).

Yikes!

For some providers the amount of payroll taxes that are due is sometimes less of a hassle than filling out all the required forms.

Getting Help

There are a variety of ways you can get help.

  1. My annual Family Child Care Tax Workbook and Organizer [http://tomcopelandblog.com/2011-family-child-care-tax-workbook-and-organizer] has a chapter explaining how to fill out all the federal payroll tax forms including examples of hiring your spouse or own children.
  2. Some tax preparers offer payroll tax services. If yours doesn’t, ask them if they know of someone who does. You may find that after getting help for a year you may be able to file all the proper forms on your own.
  3. Your local bank may offer a payroll tax service.
  4. There are a number of commercial payroll tax services to help them with this paperwork nightmare.

Most Popular Payroll Services

The three most popular payroll services are:

  • QuickBooks [https://quickbooks.intuit.com/payroll/quickbooks-online/],
  • Paychex [http://www.paychex.com/payroll-taxes/small-business-payroll-services/], and
  • ADP [http://www.adp.com/solutions/services/payroll-services.aspx].

All of these services will calculate your payroll taxes and write checks to your employees (or do direct bank deposits). Once the system is set up you simply enter the number of hours your employee(s) worked and the service will do the rest.

QuickBooks offers two options: doing payroll yourself or having it done for you. The cost ranges from $27-$57 per month (prices may change).

To get a price quote from Paychex and ADP you must contact them directly.

Providers who use these services report varying degrees of satisfaction.

Here’s an article that reviews a variety of online payroll tax services: http://www.businessnewsdaily.com/7509-best-payroll-services.html


Join The Child Care Business Partnership and Get Help Using KidKare!

Minute Menu will soon be know exclusively as KidKare. The accounting section of KidKare will be available in about a month. The new KidKare will make it easier to track your income and expenses. To help you use this new upgraded software Tom Copeland has teamed up with KidKare to offer you the chance to reduce your taxes, receive direct assistance if you are audited, and personalized business advice so you can be more successful. For $15 a year you can join The Child Care Business Partnership and start receiving direct help from Tom Copeland in using Minute Menu Kids Pro. This includes having Tom review your 2015 or 2014 tax return to help you spot mistakes and correct them. For more information: http://www.tomcopelandblog.com/2013/07/the-child-care-business-partnership-tom-copeland-minute-menu-and-you.html, or email Tom at tomcopeland@live.com.

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Tom Copeland

I've been the nation's leading trainer, author, and advocate on the business of family child care since 1981. I'm a licensed attorney and have presented hundreds of business workshops for family child care providers across the country. I answer thousands of calls and emails each year to help providers, tax professionals and trainers understand complex business and tax issues. Call me at 651-280-5991. Email me at tomcopeland@live.com. Visit me on Facebook. From 1981 to 2009 I worked at Resources for Child Caring in Minnesota (now called Think Small), where I was director of Redleaf National Institute for 15 years. I've written nine books on the business of family child care published by Redleaf Press, a division of Resources for Child Caring. I was on the board of directors of First Children's Finance, a non-profit organization providing low interest loans and consulting and technical assistance to help family child care providers suceed as a business. They operate in Minnesota, Iowa, Michigan, North and South Dakota, Kansas, Missouri, and Texas. Here are some YouTube videos of me talking about my work with this organization and the business of family child care. I graduated from Macalester College (BA) in 1972 and from William Mitchell College of Law (JD) in 1980. I live in St. Paul, Minnesota with my wife Diane and two cats, Duke and Ella.