[Alexandra]

Hi all,

In the past my nanny has acted as an independant contractor - she did her own taxes and we just paid her a flat rate.

In the new year I will have a new nanny who wants me to pay her taxes for her. I just went online and applied for a Business Number so that I can deduct her payroll taxes.

I want to know what expenses I can deduct. I will be providing her with breakfast and lunch, providing her with a Metropass every month, and we will be using my own house as the "daycare facility".

Can I deduct a proportion of heat, electricity, water, mortgage, property tax, and other household bills for running the business in my home? What about a proportion of my grocery bill? And the Metropass?

If anyone has any experience with this, I would love some help. I know that there are services that will figure this all out for a fee, but I would prefer to do it myself.

Thanks!

 

[MoneyGal]

Alexandra: you are not running a business in your home (no profit motive) -- you are hiring an employee. You cannot take deductions against your personal expenses.

You will include the FMV of benefits you provide to her (room and board, Metropass) as part of her taxable income. Don't forget, you need to calculate not only PIT but EI and CPP, Worker's Compensation and, depending on your situation, possibly more. Hiring a nanny in this way is *quite* different from hiring a freelancer.

In your shoes, I'd seriously consider using a service like nannytax.ca.

 

[Berubeland]

You could take the deductions if the nanny would take more than your kids. If you take in more than your kids and they pay you... then you can claim like its a business because it is.

 

[OhGreatGuru]

As MoneyGal points out it isn't simply a matter of "paying her taxes for her". There is a complete change in the employment relationship, where you will be an employer responsible for calculating & deducting CPP, EI, Income taxes, etc. And generating T4 slips reflecting the overall compensation package, which may include the value of meals & accommodation. It is a better arrangement for nannies, who are otherwise quite vulnerable to poor employment practices. It's also a better deal for the government because the nanny's income is all above board & reported. But it shifts a considerable responsibiity to you for accounting, and may cause you to re-examine the whole compensation package. Using a service like nannytx.ca sounds like a good idea to me, but you may have to do some research to find out what the current market rate is for nannies working under this formula.

 

[Alexandra]

Thansk for the replies. I wanted to save some money doing it myself, and all the payroll tables are available online, but maybe there is more to it than that?

I have already figured out that we will be paying $429.79 per week gross to give her $9.00 a hour, or $360 a week. I have never heard of paying extra for Workman's compensation. Can anyone verify? I just know what to pay for her federal and ontario taxes, plus CPP and EI.

Now I just have to figure out how to account for meals (she gets two at my house and the goverment says they are worth $2.55 each), and the Metropass. She is live-out though, so no accomodation is neccesary. Would I have to pay EXTRA tax on these? It seems like I would be paying tax twice then, no?

 

[MoneyGal]

You will have to register with the Ontario Worker's Compensation Board, and pay premiums. You will also have to match the CPP and EI contributions deducted from the nanny's salary (I'm not sure you've included those amounts in your calculations).

I'm not entirely sure what you are asking in your third paragraph. You need to determine the FMV (based on CRA's guidelines) for the benefits you are providing and remit taxes based on those values, in addition to the salary you are providing.

 

[Farly]

You should be able to chil care expenes.

http://www.cra-arc.gc.ca/E/pbg/tf/t778/t778-08e.pdf

 

[Alexandra]

Just for future posters who need this info - you do NOT have to pay into workman's compensation for a nanny. As an employer, you have to pay provincial and federal taxes, and CPP and EI (both the employees and employer portions). That's it.

Once you figure out what you need to pay, it is simply a matter of submitting your forms twice monthly to the bank so they can pass the payment onto the government.

For those who have a little bit of time to look into the matter and who can spend 10 minutes twice a month to go to the bank on the corner, you will save a ton of money NOT using nannytax.ca, and simply doing this simple task yourself.

It would help if the government websites were a little more self-explainitory about this, but c'est la vie.

 

[MoneyGal]

Huh. Have the WSIB rules changed? Or is your nanny working fewer than 24 hours per week?

Oops. Just realized I am thinking about my own province, Ontario, only. The rules about workers' compensation may be different in other provinces. However, in Ontario, for domestic workers working more than 24 hours per week, the employer must pay WSIB premiums.

 

[OhGreatGuru]

Given OP's (Alexandra's) reference to Metropass in her intial post, I would assume she is in the GTA. So there still seems to be some disagreement over the WSIB rules.

 

[Berubeland]

Generally speaking people don't realize that almost any "job" is considered insurable under WSIB.

It becomes especially onerous when dealing with part time and irregular work loads because the WSIB want their money up front.

Also to be safe "subcontractors" need to get a clearance letter from WSIB that they are not an employee.

Why? Because if they do by some chance injure themselves while working for you you can be sued and also fined by WSIB.

Where this gets even trickier is when you hire a contractor say ABC Landscapers and an employee (deemed subcontractor) injures themselves on your property you can be sued as well. You are also responsible for getting WSIB clearance letters from any contractor you hire even for a day job. Most small inexpensive contractors will not have this at all. They can't afford the premiums.

This is a huge liability and one people should be worried about. These "subcontractors" are happy that they don't have any deductions from their check but will have no problem or choice really claiming against you if they have a debilitating injury.

 

[MoneyGal]

What I'm curious about is what's the source of advice that you do not have to pay WSIB premiums for a domestic worker. The premiums are low and your exposure to risk, as Berubeland correctly points out, is high.

 

[Alexandra]

I applied for a business number from the government online, and received an information package in the mail. It confirmed that I was responsible to pay my employee's provincial and federal taxes, CPP, EI, and the employer portion of CPP and EI. I had another question so called the government of Canada and spoke to a tax representative, and they (again) confirmed this information.

For those who actually need this information to pay a nanny and who don't want to waste money paying for a service (like nannytax.ca) that can be done easily by yourself, you can access the payroll deductions calculator online at: https://apps.cra-arc.gc.ca/ebci/rhpd/handleResultsOptionsJan10.do . For anyone who has questions and wants to speak to someone you can call 1-800-959-5525.

 

[MoneyGal]

WSIB is a provincial program.

 

[Alexandra]

Private daycare is exempt from WSIB.

 

[MoneyGal]

But are you sure? I posted the WSIB rules earlier, which are very clear.

 

[Alexandra]

Straight from the WSIB website:

1. Who Needs to Register

In most cases, you are required to register your company with the WSIB.

There are a few industries that do not have to register. These include:

• Banks, trusts and insurance companies
• Private health care practices (such as those of doctors and chiropractors)
• Trade unions
• Private day cares
• Travel agencies
• Clubs (such as health clubs)
• Photographers
• Barbers, hair salons, and shoe-shine stands
• Taxidermists
• Funeral directing and embalming

This is not a complete list as there are more industries that do not have to register. For more information, please contact your Customer Service Representative.

_____________________
The government is pretty good at squeezing every dime they can from us - had registering been a requirement, I am pretty sure they would have told me, especially after I called them specifically to ensure that all my bases were covered.

I also talked to a few parents in the neighborhood (even ones who use a tax service) and they do not pay Workman's comp for their nannies. Same for my grandparents who have eldercare - no workman's comp. I think that there are not a lot of hazards in a typical home that would require coverage. Workman's compensation seems to be more of a workplace concern.

 

[MoneyGal]

But you are not running a private daycare. You are hiring a domestic worker. Daycare = other people's children. Domestic worker = your own child.

From the WSIB web site:

Who is a domestic worker?

The title, domestic worker, includes

* babysitters, nannies, and nursemaids
* bodyguards
* butlers
* chauffeurs
* cleaning persons
* companions
* cooks
* gardeners
* handy persons
* housekeepers
* maids

 

[Four Pillars]

I gotta side with MoneyGal on this one. A nanny is not a private daycare.

I also think that injuries can happen in the home as well as the office.

That said, we have a part-time nanny/mother's helper. We just pay her cash - no ei or wc or anything like that.

What happens if you have a friend visiting and they get injured on your property? What about a casual babysitter ie the teen from next door? If they get hurt does house insurance cover that sort of thing?

 

[MoneyGal]

FP: a domestic worker is someone you employ 24 hours or more per week. Babysitters and other kinds of short-term labourers (i.e., the guy you hire to clean your gutters) are not covered. Or at least not by you. If they work for a company, the company pays premiums.