April 30 was the deadline to submit personal tax returns. In the months of June, July and August, Nannies on Call’s accountants tend to get calls about clients being audited for their personal tax returns – particularly with Child care expenses.
When the Canada Revenue Agency does a personal tax audit, they concentrate on Child Care expenses because child care expenses are a direct deduction from income as opposed to a tax credit (a tax credit is normally 15% of the amount). If you employed a nanny and claimed Child Care expenses, have your receipt prepared in case Canada Revenue Agency knocks on your door.
For a Nanny Payroll audit, the auditor is looking for the Medical Service Plan premium (MSP), bus pass, and other benefits that may be paid out to the nanny employee but are not treated as a taxable benefit. A taxable benefit is where the nanny employee and the employer would have to pay extra taxes on the amount of the benefit.
Canada Revenue Agency normally looks for discrepancies of what is due and what was paid. They go through the bank statements, remittance reports, wage statements and anything they see appropriate. Therefore this might be the time to get your Nanny payroll bookkeeping and accounting in order – just in case your name is drawn from Canada Revenue Agency’s database.
If you get a letter from Canada Revenue Agency regarding your Nanny Payroll account, contact us first – we might be able to give you valuable advice before you speak to the assigned auditor!.
Contact Linh Tsiu, Nanny Payroll Accountant