Tax Implications of Hiring A Nanny or A Housekeeper in Oakville
July 31, 2022 | Written by: Sohail Afzal
Many couples are juggling their way into life with children and careers. It is very common now for both parents to work full-time jobs, and with child care’s high cost, many families are hiring a nanny or a housekeeper to help with their children and around the home. But what are the tax implications of hiring help? Do you have to pay taxes on their salary? Do you have to withhold income tax from their pay?
In Canada, you must withhold taxes from any employee you hire, including nannies and housekeepers. However, there are some exceptions to this rule. If the person you are hiring is considered a domestic worker, then you are not required to withhold taxes. A domestic worker works in or around your home regularly, and their duties include child care, housekeeping, cooking, and laundry.
If the person you are hiring is not considered a domestic worker, you must withhold taxes. It includes nannies and housekeepers who work irregularly or perform other duties like yard work or snow shovelling. You will also need to withhold taxes if the person you are hiring is not a Canadian citizen or permanent resident.
The tax implications of hiring a nanny or housekeeper can be confusing, but it is important to understand the rules before you hire someone. Let us help you sort out the details so you can focus on what is important – taking care of your family.
Does Your Nanny or Housekeeper Qualify as a Household Employee?
To qualify as a household employee, your nanny or housekeeper must regularly perform domestic services in or around your home. These services can include child care, housekeeping, cooking, and laundry. If the nanny or housekeeper you are hiring does not perform these duties, they do not qualify as a household employee.
You are not required to withhold taxes if you pay them less than $1,500 in a calendar year.
What Forms Do You Need to Submit?
If you are hiring a nanny or housekeeper who qualifies as a household employee, you must fill out a T4A slip. This slip is used to report any payments made. To someone who is not considered an employee, such as a domestic worker. You will also need to give your nanny or housekeeper a copy of this slip so that they can include it with their tax return.
If you are hiring a nanny or housekeeper who does not qualify as a household employee, you must fill out a T4 slip. This slip is used to report any payments made to an employee, and you will also need to withhold taxes from their pay. You will then need to remit these taxes to the Canada Revenue Agency.
As an employer, you are also responsible for paying Employment Insurance premiums. And Canada Pension Plan contributions on behalf of your nanny or housekeeper. These deductions will be taken from their pay, along with any taxes that are withheld.
Hiring a nanny or housekeeper can be a big help. To families who are struggling to balance work and home life. But it is important to understand the tax implications of hiring someone before you bring them into your home. Make sure you know whether or not the person you are hiring qualifies as a household employee. And ensure you withhold the appropriate amount of taxes from their pay. If you want help, you can contact a professional accounting firm in Oakville like GTA Accounting. We can help you figure out the tax implications of hiring a nanny or housekeeper. And help you with all of your other accounting and bookkeeping needs. Contact us today to learn more.
Sohail Afzal, CPA, CMA, MBA
Sohail Afzal, (CPA, CMA, MBA) is the founder & CEO of GTA Accounting Professional Corporation. He is a highly experienced Chartered Professional Accountant and businessman himself and understands the challenges that many businesses face when it comes to cash flow management. As an experienced business consultant & tax advisor, he is helping companies grow by providing the technical, financial, and contractual information necessary for strategic decision-making.