Sunday, July 5, 2009

More fun with finding a Nanny

As I mentioned last week, I am currently in the process of trying to find a nanny. Well, now I'm more in the process of trying to figure out all of the legal hoops I have to jump through to set up having an employee. It is not something I've ever done before, so I am starting from scratch.

At first, I was a bit annoyed at all of the various forms and things you have to keep track of and take care of. It seemed awfully burdensome to have to do all of this crap just so I can write a check to someone else every two weeks. I can understand better why some small employers get all flustered and upset at government and want to vote Republican (as if that would make any difference). But really, this stuff protects all workers, including me - and that I appreciate very much, since I am also someone else's employee, as is my wife.

So while it is terribly annoying and will cost us quite a bit of extra money, I know why we need it - too many employers are bastards and even with these protections, far too many workers get screwed over. Still, it is hard for us to afford. It costs hundreds of dollars upfront to get software and services set up for doing payroll. That will pay off in the end because it will automate things. I shudder to think of trying to calculate that stuff by hand each paycheck. And this does impact the nanny too, in that, we will have less money to pay her.

There are additional taxes of about 11-12 % on top of what we'll pay to the nanny in salary (and of course, she'll have money taken out on her end as well). This is to pay for SS and Medicare deductions and State and Federal Unemployment Insurance. Thankfully, we don't have to buy Workers Compensation Insurance. I have no idea how much that would cost (but I assume it isn't cheap) - it is only required if you have more than three employees, and we'll only have one.

Some things have been pretty easy. Getting a Federal Employee ID was easy. You can get that online and it is basically instant. You can then use that for setting up everything else. Michigan requires filing a new business form for tax purposes. 518, I think it is. I filled that out and will send it in Monday. You have to fill out I-9 forms (to prove the employee is allowed to work) and W-4 and MI-W4 for withholding. I remember filling these out for every job I ever had, so I guess I should not be surprised.

I went out and got binders to put all of the various supplements on Federal and State employment taxes. I got another binder to put all of the information for the nanny, including, eventually, copies of each pay stub. I'm going to have to file quarterly taxes for her, state and federal, in addition to an annual return. All in all, there is a whole lot of work on my end for this. I've already spent many hours looking this stuff up and getting stuff ready. I hope it will be relatively automated and easy once things are set up, but no matter what, I will be spending extra time on this on an ongoing basis.

I suppose on the upside, if I ever do form my own small business (like if I hang a shingle) I'll already have some experience relevant to that. Still, I'd think a real business would hire someone to handle HR matters who was an expert at it and so I really wouldn't need to know about that stuff anyway. Of course, hanging a shingle, I'd be a rather small business and the less overhead the better. Not that I'm planning on doing this any time soon, if ever. I like my job. But it is an interesting thought.

My big worry now is that I'm going to miss something important. I'm pretty sure I have all of the basics covered. I'm a little worried about getting the particulars right for the taxes, but I am fairly confident the tax software will handle it - that's what it is for, and it keeps updated as the law or rates change over time.

I never would have thought I'd be doing something like this when I decided to take the plunge and reproduce. Ah, the joys of parenthood.

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