Myth #1 - I don’t need to give my Nanny a paystub – I know I always toss mine!
Well – actually, you really should provide a paystub. The various provinces’ Employment Standards outline requirements for details to include on the pay statement. Be sure to follow the guidelines. Besides, did you ever notice that your own interest in paystubs increases as the year comes to a close – we all want to see how much money we made!!
Myth #2 - My Canada Revenue Agency Statement of Account shows $0.00 assessed, so I don’t need to pay anything.
More than likely – wrong!! You want the assessed amount to be $0.00! All that means is that the CRA isn’t coming after you for an amount owing, and hasn’t assessed any penalties for late payments or filings. The CRA doesn’t actually know what you are paying your caregiver until you submit the T4 and T4 summary. That is when they piece everything together and figure out if there should be any amounts owing. If you calculated everything correctly, kept to employment standard rules, and paid your monthly remittance on time, then all is well.
Myth #3 - I can pay for all the amounts owing to the CRA once a year.
Not unless you want to pay some good old CRA penalties! Payroll source deductions are due by the 15th of the month after payroll. For example, for the amount you paid your employee in February, the remittance to the CRA is due by March 15. Be sure to pay on time, every time. Eventually, being negligent will catch up to you!
Myth #4 - If I pay the CRA remittances on time and file my caregiver T4s on time, then there is no chance I will be audited by the CRA.
From time to time, the CRA completes random audits. Even in your first year of doing payroll, they can make an appointment to come to your home and ask for bank statements and payroll records to support the remittances you have made. If you have kept your information, and made no mistakes, then just think of it as a friendly visit from your neighbourhood CRA representative!
Myth #5 - My caregiver received a refund on their tax return, so I must have overpaid the CRA.
OK – so not all of us get money back when we complete our tax returns but we need to remember that each individual’s personal set of circumstances are different. Each individual’s personal tax profile is what will determine whether or not they will get a refund. Perhaps your employee made RRSP contributions, made some donations, or had a tuition bill to pay. There are so many possibilities; bottom line is that it doesn’t mean that you somehow spent more than you should have. Similarly, if your employee ends up owing money to the CRA that also doesn’t necessarily mean that you did something wrong either. Perhaps the employee had income from another source, or had a credit on their TD1 form that wasn’t valid. Everyone has different circumstances.
There are plenty of myths and misconceptions when it comes to caregiver taxes and employer responsibilities. The best advice is to seek information from knowledgeable resources (and I don’t mean your friends who are in the same boat!).
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Deborah Shure is the founder and owner of Shure Consulting Services - Canada’s provider of payroll tax services for nanny or elder-caregiver employers. With the help of Shure Consulting Services, clients across the country are able to spend more time with their family and less time on nanny tax paperwork. For “nanny tax frustration relief”, visit www.nannytax.ca, email info@nannytax.ca, or call toll-free at 1-877-NANNYTAX (1-877-626-6982).
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