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).
For some providers the amount of payroll taxes that are due is sometimes less of a hassle than filling out all the required forms.
There are a variety of ways you can get help.
- 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.
- 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.
- Your local bank may offer a payroll tax service.
- 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 firstname.lastname@example.org.