Hiring Grandma as the Nanny

Question:
I have a 1 year old daughter. I started work a month ago and I’m leaving my baby with my mom. I want to pay her $400 monthly …she didnt wanto to accept any payment but we agreed on that amount. Does my mom have to count that income for taxes? Can I claim her pay as a childcare expense? Should I hire her as a nanny? Do I have to apply for a business number?

Answer:
You are lucky that you were able to wok out an agreement with your mother. We consulted our Nanny Payroll accountant and she gave us the following information.

The issues are:

  • If you plan on claiming Child care expense.
  • If your Mom plans on applying for EI with your employment of your Mom as a Nanny Employee.
  • Either way, you will have to register for a Payroll business number and hire your Mom as an Employee and not as a Contractor because CRA deems Household Nannies as an Employee. See blog post “Is your nanny an independent contractor or an employee?”

Your Mom has to claim any money received from you or anyone as income and pay taxes accordingly.

Every situation is different so I advise you to apply to Canada Revenue Agency for a ruling if you plan on doing either of the first two points.  The CPT1 form for the ruling is also in the link.

http://www.cra-arc.gc.ca/tx/bsnss/tpcs/pyrll/clcltng/ei/fmly-eng.html

Feel free to contact Linh if you have any more questions about hiring grandma as the nanny.