Nanny Sharing, Temporary Layoff, Adjusting to Covid-19 – You Still Need to File Your T4 Forms on Time
Covid-19 has forced many difficult choices on families. Maybe you had to hire help to keep an elderly parent living at home and out of a nursing home. Maybe you had to layoff your nanny for a couple of months. Possibly you and another family got creative in 2020 and established a way to share a nanny. All of these adjustments to the “new normal” impact your payroll filing.
You are still a legal employer to your nanny. Whether you have hired a nanny alone or have a nanny share, you are required to complete payroll for them and provide them with pay statements. There are a couple of ways to handle this.
The two families can each have their own business number with the CRA which means separate pay statements and source deductions, separate T4s, and each family ensuring they are compliant with Employment Standards. When operating separately (or any time for that matter), it is important that the employee complete the TD1 form for both families. Without it, the employee may end up claiming the basic personal tax credit twice and then possibly owing thousands to the CRA when they complete their tax return. Claiming “0” tax credit with one employer may not even be sufficient to avoid this situation, so it is best to discuss options with a payroll expert.
The other option is to have a partnership between the two families. While this means one pay statement and set of source deductions, one T4, and less complication with respect to the personal tax credit, it does introduce a liability issue if one party becomes negligent in payment. Whichever method the families choose, the T4 still needs to be filed by the end of February.
A Record of Employment (ROE) is required to be submitted to Service Canada by the employer when there is an interruption in earnings of the employee:
If you needed to temporarily lay off your Nanny, this document should have been submitted to Service Canada at the time of the disruption in employment, enabling the employee to apply for Employment Insurance (EI) benefits.
Your T4 for 2020 will need to be filed whether the layoff was temporary or permanent.
On top of a T4 Slip, you must submit your T4 summary to the CRA—a fact that many in-home employers are unaware of.
Your T4 summary breaks down your remittances into exactly how much of your employee’s salary went into taxes, Canadian Pension Plan, (CPP), and Employment Insurance (EI). Remittances are the lump sum accumulated in taxes, CPP, and EI, and should be submitted throughout the year, either monthly or quarterly (depending on the CRA’s directions).
The summary also contains your share of CPP and EI. It’s all too common that domestic employers only learn about filing their own portion of the remittances once the CRA has doled out a stiff penalty for not filing them.
For the CRA’s explanation of filing your T4 slip and T4 summary, click here.
Don’t Submit Past Due
You have until February 28th to submit T4s to the CRA. If any employer of less than 50 staff members submits their T4 slip or T4 summary past due, they will be penalized a minimum of $100.
How NannyTax Can Help
As the first domestic payroll service in Canada, NannyTax has the most experience in helping Canadians set up payroll for their caregivers, and has been watching the rising trend of nanny share arrangements. NannyTax provides customized solutions and advice when it comes to nanny shares and takes care of all details, saving hours of our clients’ time each year. At NannyTax, we help you avoid the stress of crunching numbers and impending deadlines. Our experts in the industry walk you through all the best options for your payroll and take care of every detail, so you don’t have to worry about missing any costly steps. When you use NannyTax, you save money on potential miscalculations and penalties from the CRA and WCB. We aim to save on your household budget and give you the peace of mind you deserve. We’re just a phone call away, so don’t hesitate to get in touch with any questions!
Where You Can Reach Us
Call toll-free: 1.877.626.6982
Email us at any time: taxquestions@nannytax.ca
