If you have more than one child, and they’re not at a Quebec subsidized daycare, it’s likely to be cheaper to hire a nanny to take care of them, after all taxes are considered. Beware though, it is complicated. So be ready to deal with a significant amount of admin to do so!
In today’s post, let’s talk about what and when you need to report to the government when you hire a nanny.
In my last post I talked about how to find a nanny and your responsibilities as an employer when you do hire one, including salaries, vacation time and payroll deductions. That was between you and your new employee. Now let’s look at what happens between you and the government. Any employee, including your nanny, who legally works in Canada must have a Social Insurance Number or SIN. It seems obvious but better safe and legal than sorry!
What are your responsibilities as an employer?
As an employer, you’ll have to do monthly remittances and tax reporting to Canada Revenue Agency and Revenu Quebéc. These include Pension Plan, Parental Insurance Plan and Health Services Fund contributions to Quebec and EI deductions to CRA. And while most employers do need to register with the Commission de la Santé et Sécurité du Travail (CSST), the Quebec government’s health and safety insurance for workers and employers, you don’t need to. This is because people who are employed as domestic workers are considered self-employed and must apply for their own coverage by the CSST.
Now let’s talk about tax deductions on your tax returns. The CRA allows a deduction to the lower income spouse of up to $8,000 for kids under 7 years old. That drops to $5,000 for kids between 7 and 16 years old.
As for the tax credit from Revenu Quebec, well, it’s complicated but I’ll try to explain: If your family income is over $155,000, then you’ll get 26% back on up to $9,000 of expenses for a child 6 years old or less. Over age 6, the expense ceiling drops to $5,000. If your family income is any lower than $155,000, you’ll get a higher percentage back. I did say the taxes were complicated! So unless you really love doing your taxes, the best option is to hire an accounting service to track your payroll and deductions at source, and to produce your tax returns taking all these into account. It’ll be much easier and less stressful for you at tax time.
Remember, this person is being hired to take care of your kids and be in your home, so treat the relationship with respect. As an employer, your job is to be fair, clear, and to keep everything well documented. Do this and your family, and nanny, will thrive together. If you are interested in more information like this, sign up to my