FS#1: Employer Responsibilities: The “Bottom Line” for Home-Based Day Care Providers

Employer Responsibilities: The “Bottom Line” for Home-Based Day Care Providers

What follows is basic information about what you need to do when you employ staff. This fact sheet is designed to help you figure out where to start and how much you can expect it to cost to pay required taxes and provide required benefits for your employees.

Estimated costs are based on your program employing one assistant who:

Earns $7.25 per hour, the minimum wage required under New York State law and federal law
Works full-time (40 hours per week)
Gets paid bi-weekly, receiving gross wages of $580.00 ($15,068 per year)

1. Get an Employer ID Number (EIN) and New York State Employer Registration Number (ERN).

An EIN is a tax identification number for your business. The New York State ERN is a second identification number for unemployment insurance purposes.

To get an EIN, call 800-829-4933, or visit www.irs.gov/businesses/small/index.html.
To register with New York State, call 518-457-4179 or visit https://uiereg.labor.state.ny.us/eRegWeb/eRegInitialPart1.html.

2. Verify that your assistant is authorized to work, and withhold and pay taxes from your assistant’s wages.

When you hire an assistant, you are required to verify her work authorization using Form I-9 and report your new hire to New York State.

Your assistant needs to complete IRS Form W-4 and New York State Form IT-2104 so you (or your payroll service) can figure out how much to withhold from her paychecks for federal, state, and city income taxes as well as her share of FICA (Social Security and Medicare) tax. You are responsible for withholding these amounts and paying them to the IRS and New York State. While these amounts do not come out of your pocket, you will have to pay for any payroll service or software you choose to use.

To find out more about federal withholding taxes and required forms, call 800-429-4933 or visit www.irs.gov/businesses/small/index.html (click on “Businesses with Employees”). For state withholding taxes, visit www.tax.state.ny.us/nyshome/wtidx.htm.

3. Set aside your own money to pay FICA (Social Security and Medicare) tax on the wages you pay to your assistant.

FICA tax is 15.3% of wages. Half (7.65%) is paid by the employer and half is withheld from the employee’s wages. You will pay this tax along with federal income taxes you withhold from your assistant’s checks using IRS Form 941.

Bottom line: For the example above (assistant is paid minimum wage and works 40 hours a week), you will pay $44.37 every two weeks for your share of FICA, or $1,153.62 per year.

4. Set aside your own money to pay unemployment insurance taxes on the wages you pay to your assistant.
You must pay both federal (FUTA) and state (NYS UI) unemployment taxes.

FUTA tax is paid with IRS Form 940. When you pay depends on how much you owe.

For more information about FUTA amounts and forms, call 800-429-4933 or visit www.irs.gov/businesses/small/index.html (click on “Businesses with Employees”).

NYS UI tax is reported and paid after each calendar quarter with Form NYS-45-MN.

For more information about NYS UI amounts and forms, call 888-899-8810 or visit www.tax.state.ny.us/sbc/hire.htm, or www.labor.state.ny.us/ui/ui_index.shtm.

Your unemployment tax rates and amounts will vary. FUTA tax is generally 6.2% of the first $7,000 paid to each employee, but as long as your NYS UI tax is paid in full and on time, the rate is discounted to 0.8%. NYS UI tax is paid on the first $8,500 paid to each employee, the rate changes every year, and it is different for every employer. New employers can expect the rate to be at least 4.15%.

Bottom line: Based on the example above, expect to set aside and pay about $56 at the end of the year in FUTA tax, and at least $353 over the course of the year in NYS UI tax.

5. Workers’ Compensation and Disability Benefits Insurance

You are responsible for buying Workers’ Compensation and Disability coverage in case your employee is injured or becomes ill. You can purchase policies for these two kinds of coverage through the New York State Insurance Fund (NYSIF) or an insurance broker.

For more information on Workers’ Comp. and Disability Benefits Insurance, call NYSIF at 888-875-5790, or visit: ww3.nysif.com/Home/EyebrowPages/ContactUs.aspx.

Workers’ Comp. premium amounts vary depending on the number of employees, type of business, location, history of claims, and other factors, so it’s a good idea to shop around. Most insurance carriers offer price quotes over the phone or the Internet.

Bottom line: For the example above, based on a new business in Brooklyn, NYSIF estimated the Workers’ Comp. premium in 2008 at about $342 per year. The estimated Disability premium in 2008 is about $100 per year.

If your employee is a member of your family, the unemployment, Workers’ Comp., and Disability coverage rules may be different. Check with the appropriate agencies for specific requirements. Also review our fact sheet “Payroll Responsibilities for Family Members as Employees.”