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Avoiding the Frustrations of Canadian Nanny Tax Paperwork!

by Deborah Shure

It wasn’t easy – but you finally found what you are hoping will be the perfect nanny! And now you quickly realize there is a host of new responsibilities when becoming someone’s employer. From figuring out nanny taxes, CPP, and EI, to vacation time/pay, sick days, statutory holidays, and the list goes on. Confused? You are not alone and there is help where you need it!

Navigating all your sources of nanny tax and payroll frustration can be daunting: How do you (‘the employer’) get a Canada Revenue Agency (CRA) payroll deductions account set-up; what should be included in the contract with your nanny (‘the employee’); should you register with the Workers’ Compensation Board; are the benefits you are providing such as room & board, a bus pass, or payment of an airline ticket taxable; are the taxable benefits considered insurable income for EI premium purposes; ...head spinning yet??

After you have figured all that out, there is still more paperwork to keep up with!! Here’s what you need to know to fulfill some of the Canadian nanny tax requirements:

  • TD1 form – you have probably filled one of these out yourself when starting a new job. Any new employee needs to fill out a TD1 Personal Tax Credits Return form so that their employer knows how much tax to deduct from the employee’s pay.
  • Pay slip – when you hand your Nanny a pay cheque, you also need to hand over a pay slip. Information on the statement is detailed and is outlined by employment standards. Make sure you keep copies of the pay slips for your records.
  • CRA remittances – amounts payable to the Canada Revenue Agency are due on the 15th of the month following payroll. It is up to you to figure out how much to remit for taxes, CPP and EI. Unlike your gas bill, the form you receive from the CRA will be blank!
  • T4 and T4 summary – when the calendar year is over, and before February 28 of the following calendar year, you will need to prepare and give a T4 to your Nanny. A copy of the T4 also goes to the CRA with a T4 summary which shows the total earnings and deductions from all employees. Make sure to file on time, or a penalty will be assessed.
  • Record of Employment – whenever an employee has an interruption in earnings, a Record of Employment needs to be completed. This form is required for various reasons including if the employee wishes to apply for Employment Insurance. Forms are available from Service Canada – not the CRA. All of the immaculate record keeping you have been doing will now pay off since you will need to report insurable hours of work and earnings over a particular number of pay periods!

So, you thought that having a Nanny was going to make life easier? Well, it does – but it also opens up a whole other host of responsibilities – ones that don’t need to frustrate or confuse you!
Shure Consulting Services – – 1-877-NANNYTAX (1-877-626-6982)

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