Avoid Tax Evasion: File Your Nanny Taxes Correctly Every Year
Many people who are not accountants, bookkeepers, and tax professionals do not understand what tax evasion is. Most think tax evasion means hiding millions and millions of dollars in offshore bank accounts in the Canary Islands or Switzerland. However, tax evasion is simpler than that. Anyone, from any class or wealth bracket can commit tax evasion by simply not reporting his or her earnings and tax obligations dutifully to the Canada Revenue Agency (CRA). Make sure you do not accidentally become a tax evader by following the rules.
Not everyone who commits tax evasion actually means to do so. The rules and laws concerning the proper filing of your income and tax responsibilities with the CRA every April can be confusing, and the margin of error can be high. Hiring a professional accounting firm to handle your taxes, especially nanny tax, as well as to advise you on proper filing procedure, can therefore be immensely beneficial to ensuring you are not penalized by the CRA for tax evasion.
Nanny Tax: A Common Tax Evasion Issue
It is common for employers of nannies to not think of themselves as such. After all, the common reasoning is that you have to own and operate a physical business with employees who work from 9 to 5 five days a week to be one. This is incorrect.
Your nanny, whether they are the regular neighborhood babysitter or one hired from a professional nanny placement service and who only works for you, is your employee. Since you are paying them their wages for a service they are providing to you, you are their employer and you need to act as such.
Paying your nanny in cash at the end of the day or night, paying him or her under the table, hiring him or her as an independent contractor, or neglecting to offer such requirements for employment to him or her like vacation pay and Canada Pension Plan (CPP) and Employment Insurance (EI) deductions, and more, is illegal and counts as tax evasion. If you ignore or avoid following the CRA’s requirements when filing your taxes, according to them you are a tax evader.
You should contact the CRA or a professional accounting firm to understand your obligations as an employer, especially of a nanny, to avoid being labelled a tax evader. It is not worth the legal hassle to avoid paying accurate taxes to the government. Take an extra ten minutes out of your busy day to ensure an accidental filing does not follow you for months, if not years.
As his or her employer, you need to make the necessary deductions on your nanny’s wages, and then remit them (in addition to your own share of deductions as their employer) to the CRA. Not reporting these deductions accurately can financially harm you.
Depending on the CRA’s assessment of your tax statements, you can be fined, and you may even be required to pay your nanny’s portion as well, if you misfile. You should strive to accurately file your taxes every time you do so. While mistakes are made from time to time, especially if you do it yourself, the CRA is more understanding if you already have a stellar record, and you may not face a penalty.
Contact a professional accounting firm today that specializes in nanny tax to ensure you do it properly, every time.
Tax4Nanny is a professional accounting firm that specialized in nanny taxes. If you have questions regarding nanny tax, or you are looking for professional assistance when filing them, look no further. The Canada Revenue Agency’s requirements can be confusing for some people, and that is ok. We are here to help you file your taxes accurately and easily. For more information concerning nanny tax, please visit us at our website.