Having a nanny in your home isn't something that should be taken lightly. Many people miss the serious implications of hiring someone to work in their home.
Here are 5 things that every parent should be aware of when hiring a nanny:
Congratulations, you are an employer!
Most people are not aware that when they hire a Nanny they are in fact considered an employer by law. Many think it’s ok to just pay cash, but the Income Act requires the withholding of income taxes, Canada pension plan (CPP) and employment insurance (EI). The Employee Standards Act also applies, and as such, you are required to pay WSIB premiums on the employees behalf and complete records of employment as applicable.
Penalties for not remitting to the Canada Revenue Agency (CRA)
Not filing appropriately for a caregiver can run penalties of 10-20 % of the total amount you’re required to withhold and remit and their are several penalties you can be hit with which can amount to a significant amount of money.
There are also taxable benefits to employing a nanny; because the nanny is considered an employee, all taxable benefits of having an employee apply. Usually this is the room, board, and food that live-in nannies are not being charged for, but can also include holiday bonuses and other benefits provided by the employer.
Paying Your Nanny
Nannies are often new to Canada and banks may put a hold on cheques deposited into their accounts, forcing them into using cheque cashing services that charge high fees. Payroll services like Toronto based The Payroll Nanny are available and use direct deposit payments, which helps to avoid this situation.
CRA Voluntary Disclosure Program
If you have a nanny and have not remitted deductions to the government, you can sort out what past obligations are and submit the outstanding remittances through the CRA’s voluntary disclosures program to avoid penalties before the account is flagged.
The Payroll Nanny is owned and operated by Trowbridge Business Services Inc. an accounting firm in Toronto. For more answers to frequently asked questions around the tax and pay implications of hiring a nanny visit The Payroll Nanny website.