 How much will it cost to hire a child care assistant? You can pretty easily estimate the amount of wages, but what about the payroll taxes, insurance, etc.? This article will give you some idea of the total cost of having an employee.
Remember that regular daycare business helpers are always considered employees. You cannot treat these workers as independent contractors and give them a 1099-MISC. You must withhold taxes from their wages and give them a Form W-2 at the end of the year. Many day care providers are under the impression that it's okay to give a 1099-MISC to helpers. Some tax preparers even encourage this practice, but this is bad advice. I think they are just telling you what you want to hear so that you won't decide to go to another preparer. All it takes is an Internal Revenue Service (IRS) audit or a worker complaint and you can face high payroll tax penalties, in addition to a lump sum bill for the payroll taxes you should have been paying over the years. One positive note regarding payroll is that all of the costs are 100% deductible as business expenses. ... Some payroll taxes are paid by your child care employee (withheld from their wages) and some are paid by you as the employer. First the EmployEE Taxes Here's an example of a biweekly paycheck for 70 hours at $9/hour: $630.00 Total wages (70 hours x $9)
- $51.00 Federal income tax withholding
- $39.06 Social security employee contribution
- $9.14 Medicare employee contribution
- $9.50 California income tax withholding
- $6.93 California state disability insurance (SDI)
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$514.37 Net paycheck amount Total employee taxes per paycheck come to $115.63 in this example. Here are the EmployER Taxes $51.00 Social security employer contribution
$39.06 Medicare employer contribution
$5.04 Federal unemployment insurance*
$21.42 California unemployment insurance*
$0.63 California employer training tax*
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$117.78 Total employer taxes per paycheck *Note that these three taxes apply only to the first $7,000 of wages for each employee. You pay nothing more after an employee has received $7,000 worth of wages in the calendar year. Paying these Payroll Taxes Every payday, you will write a paycheck for your employee using the net paycheck amount ($514.37 in the example). The employee's withheld taxes and your employer taxes are paid to the IRS or the California Employment Development Department (EDD) either monthly or at the end of the quarter. Most of the child care employers run a small payroll and qualify to pay quarterly. How Much Will You Owe at the End of the Quarter? Paydays are every two weeks. If there are six paydays in the quarter, the wage and tax cost of your employee will be: $3,086.22 Total net paychecks
$693.78 Total employee taxes withheld
$716.68 Total employer-paid taxes
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$4,496.68 Total payroll cost for the quarter The employer will pay $3,086.22 during the quarter as biweekly paychecks and $1,410.46 at the end of the quarter to cover the payroll taxes. Other Payroll Costs Other payroll costs include the cost of a payroll service and workers' compensation insurance. You will need a payroll service, unless you undertake to do all the work yourself, with or without software, as covered in my Payroll Tax Guide. Most child care providers have so many record keeping tasks to keep up with that the last thing they need is to be preparing their own payroll tax returns and calculating the payments. Especially since, as mentioned previously, the penalties are high for late payments and tax returns. Compare the rates and services offered by payroll services in your area. From what I hear, the large companies (such as Paychex and ADP) are charging about $60 every payday, which comes to at least $1,440 per year. (You must pay California day care employees at least twice per month.) I started my own Family Child Care Payroll Service this year to offer a more affordable service especially for child care providers, at about half this cost or less. California requires all employers to have workers' compensation insurance and it seems that the minimum cost is around $1,000 per year. My affordable worker's compensation insurance article provides further details and links to various companies where you can get a premium quote.
Last updated 27 July 2010
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