In Canada, it is especially important to deduct nanny taxes. If you employ a nanny, then you must have a payroll deductions account with the Canada Revenue Agency (CRA).
Nanny Tax Deductions - Actual Requirements
Family employing a live-in Caregiver under live in caregiver program is required by federal law to register as an employer with the Canada Revenue Agency (CRA).
One must make the proper deductions for income tax, employment insurance and Canada Pension Plan and remit these amounts to the proper federal authority.
When registering as an employer, the CRA will provide an information guide that contains the necessary forms and instructions. The employer must comply with the law and provide the employee with a record of employment (ROE) when the employee's work term has ended.
(http://www.cra-arc.gc.ca/tx/bsnss/tpcs/pyrll/clcltng/spclsttns/crgvr-eng.html).
Generally, one needs to complete a T4 slip stating that a) if you are an employer and b) you paid your employees employment income, commissions, taxable allowances and benefits, or certain other payments.
While many parents try to avoid tax-reporting hassles by paying their nanny under the table, you do so at your own risk. The government expects you to pay your nanny legally, which means you're required to pay nanny taxes. Consider hiring a payroll service that specializes in domestic workers.
What Tax4Nanny Does to Calculate Nanny Tax Deductions in Canada
Tax4Nanny goes through the exhaustive process in calculating nanny tax deductions, and covers all bases, so you can be assured that your nanny tax deductions are properly filed.
Call us today for a free quote.
Resources
Payroll Deductions Calculator: http://www.cra-arc.gc.ca/esrvc-srvce/tx/bsnss/pdoc-eng.html