A Taxing Situation in Canada

I began working for my current family in 2009, when I started working for this family and we discussed pay and taxes I stated that I wanted to make $15.00 per hour which in the nanny-world I was assuming is take home or net pay. When the first tax season came around, I asked them about taxes and they replied "don't worry about it". That being stated I still claimed a partial portion of my pay to avoid issues. They then claimed this same portion and that was that. One of the employer's did mention that in our contract it was stated that I would pay my own taxes, I simply ignored this comment and went with the "don't worry about it" from the male employer. I ended up paying out just over $1000.00 The following year, I told them I would be claiming X-amount, and then they also claimed X-amount and it was fine. Nothing else about it was brought up. I claimed about half of my income and paid on that portion. I ended up paying out around $2,500.

This tax season came around, and since nothing was talked about prior, I assumed we would carry on the same deal that we have been doing this whole time when I pay on a portion that I can afford. However, when I told my boss the number that I had selected he seemed upset but did not say anything further about it. I ended up claiming a larger portion and I paid out around $3220.00. My employer stated to me, that starting right away, I would need to claim the actual number I make for the next tax season. Claiming the real number would result in me paying out $7,000 in taxes at the end of the year! This "change of plans" will alter my current take-home income from $2835.00 a month to $2235.00 a month. This means that on an hourly basis I will make $12.69/hr compared to my prior $16.10/hr. Which for me is a huge hike! On top of that they want me to claim my own taxes which means that I would have to save [on my own] the amount owing at the end of the year, rather than have my employer dock it from every pay check. In my opinion this means that my employer is getting away with a lot as they aren't having to pay on my portion at all as they are considering me a self-employed person.

I am not really sure how to approach this situation, on one hand I feel that I should "let it go" and pay taxes for the year as requested as I have got off without doing so proper for two years prior and thus saved money. Also the child will be starting school in the Fall (half-days) and I do not think that my employer will be altering pay thus, I will be getting paid three hours per day to essentially stay home. (I think that this is true as currently the child does go to a preschool where we have this arrangement currently and will just keep it when JK starts). My daily responsibilities are to care for the child, clean the child's area of the house, child laundry, cooking, grocery, errands, party plan, etc. I do it all. Also, I work for a single father which often results in myself getting overwhelmed with his messes and cleaning his clothes, and messes around the house as well at no extra pay. I have been doing this for three years so its kind of a self-assumed duty, as otherwise I cannot work such unclean conditions.

Please note: - Contract renegotiations are coming August 31st, 2012. - I reside in Canada, and thus U.S nanny-tax laws do not apply to me. - I have ten years experience, and three years with this particular family. - Over the past year I have been through a lot of issues with the child's non-custodial parent which has caused a lot of stress and even court related incidents. - I take care of one child - My employer provides me with a car for work and personal use (I take it home), the gas for the car (work week only), the insurance, and all car repairs, and toll charges. - I have a great relationship with the family. - I am planning on leaving this family September 2013 to go back to school full time.

My questions are: 1. Do you think that I should "suck it up" and just take the hit in pay for one year? 2. Do you think that I should ask for a net pay of $15.00/hr going forward in my new contract? 3. If you were my employer would you be upset at my new request, and look for a cheaper nanny with less needs? Any other advice would be much appreciated, however, please do not reply with "you should be paying taxes, or serves you right etc" I am looking for advice, not judgments. Thanks, From: Northern Nanny.
Please be respectful of OP's request for non-judgmental opinions. Thank you!


NoIsntABadWord said...

You're grossly underpaid. Groceries, errands??? WTH. That's a whole nother job. You should be getting $25 an hour. Get a homebased biz so u can write off many expenses and you'll get money back from taxes. You aren't making enough that you should be paying.

Tax said...

Do NOT let them screw you over! So many families do weird tax things, and a lot of them are trying to save money and screw over their nanny. You need to have a very frank and honest discussion about taxes and how to handle them. I have always been paid under the table, but I know that tax questions can be tricky for nannies.

I know this is easier said than done, but you need to have a discussion with your bosses and sign a written contract that details all tax issues.

Lyn said...

ABSOLUTELY tell your DB that you will need a minimum of $15 an hour net once negotiation time comes around. If you are used to living off of 5-600 dollars more a month this is a huge hit to your lifestyle. DB should agree to that since he is getting you at a heck of deal! However, if you think he may go for it given the amount of time you've been with them, I'd swing for a higher number. At least $17-18 an hour to start. You are worth more from the sounds of things but this seems like a "safe" increase in pay to discuss.
Also, make sure you get in writing EXACTLY what the 2 of you agree to tax wise. I don't know how it works in Canada, but in the US you could very easily get screwed with fines and possibly court fees if things don't match up perfectly.
Good for you for agreeing to pay taxes on your entire income though! No judgement from me. As a Nanny of 5 years I think we have all at one time or another not paid taxes on everything they should probably be paid on. IE regular babysitting jobs aside from your usual Nannying job. This has always been my down fall.

UmassSlytherin said...

I don't get why people don't claim everything they make. i mean, I understand why people don't want to pay taxes and don't think they should. That I get. i just don't understand not doing it.

OP, tell the parents what you want. I don't blame them for wanting you to claim everything you make. to do otherwise is dishonest and illegal. But I'm sure you can find another person who doesn't want to do it legally honestly. Good luck with your tax evasion.

MissDeeWantsToLiveInHerFreezer said...

I have a childcare client who is a single father. His kids used to attend my old center. The first time I took care of his kids, he paid me $25 for 5 hours. The house was a mess: dishes piled up in the sink, clothes and toys all over. Kids shared a room due to house being small. He is a very nice person, screwed over by his ex wife, whom I can't stand. Anyway, he asked me to babysit again, and I politely told him I needed $10/hr. Done.

I agree with the above poster that you need to make more money for all that you. In a weird way, you do what a wife would do. Single fathers are terrible housekeepers!! lol

Have you considered contacting Breedlove and Associates? They specialize in nanny taxes.

between the lines said...

"they are considering me a self-employed person" stood out... isn't that illegal of your employers to do that?

MissMannah said...

Your post made my head spin--probably because I do not understand taxes in my country, not to mention tax laws in yours! All's I know is your #1 mistake was assuming that your hourly wage would be your net pay. Your wages are always your gross. So if you are needing $15 an hour net, then you need to request something along the lines of $18-$20. I also agree with PPs that you are being underpaid if you are doing household chores and errands.

Northern Nanny said...

Hello Everyone,

OP here.
First, thanks to everyone who has posted their advice/opinions thus far.

I guess what it really comes down to is that I don't understand the tax laws either- at all. I have an accountant but they do not specialize in nanny-taxes and is a family-friend which is why I use this person.

I worked through the numbers and this is what it looks like:

First Year:
I was making $1350.00 every two weeks.
I worked 51hrs/week
I was making $13.23/hr (take home)
I wasn't on the "books" and thus took home my entire pay.
This is equivalent to making $44,350 GROSS in the tax-paying world.

Following year I got a 5% raise...
I was not paying taxes and thus was bringing home $708.75 every two weeks.
This is equivalent to $46,860 GROSS
I was earning $13.89/hr

In 2011 I never got a raise and instead got an additional vacation week and less hours.
I was being paid to work 47hrs/week.
I had begun paying taxes on half of my actual income.
I was earning $46,860 GROSS.
I was earning $15.00/hr take home.

In 2012, my employers announced that I need to pay "REAL TAXES" on what I make.
This means that I will go from making $15.00 per hr to making $12.05 per hour
My TAKE HOME will go from $708.75 weekly to $566.75 (with the estimated that I will be paying $285.00 a pay period to taxes)
This is a huge difference for me, and I wish to remain at taking home $15.00/hr

I am willing to make an exception for the three hours he/she is in school, I want to charge $12.00/hr when she/he is in school and $15.00 otherwise?


COnanny said...

I am with MissMannah here, when I agree on an hourly rate with an employer, it is understood that it is the gross pay. If you mean it as a take home pay, you need to specify it to the employer and your contract.
I think that if your employer wants you to pay "real taxes" now, they need to adjust your rate accordingly. You should not have to suffer because they change their mind. You and your family had an agreement and if they want to change the terms of it, so can you. I think that you should all sit down and talk about it. Bring copies of the tax laws to make them understand that they cannot do whatever benefit them only, you have rights too. You need to pay taxes but so do they!

StrawberryShortKakes said...

I think I am a bit confused. Why does the DB care if you pay taxes on only a portion of your pay versus all of your pay?

MissMannah said...

Don't make an exception for when the kiddo is in school--that just makes the issue all the more confusing.

Like I said, I really don't know how it works in Canada but in the US, the employers are supposed to deduct taxes. So if your employers wanted to be legal, they should have been doing that the whole time. (assuming the laws are the same) I would actually bring that up to them and yes, I think you are in your rights to tell them that you want the same approximate take-home pay.

Northern Nanny said...

@ Strawberry Short kakes,

I think that he cares because that means that he will get a bigger tax write-off but I am unsure of the exact reason.

Bethany said...

I do not know Canadian tax laws so I can't offer you advice.

But in my opinion you should be making more. Quite a bit more.

I always give my salary as a gross figure, as I was taught that was the professional thing to do.

There are calculators online where you can plug in what you'd like to take home(net pay) and they'll give you the gross figure you tell your employer.

You employer may give you are hard time about the taxes and your rate, but if he thinks you are worth it he'll do it. If not move on. If it's important to you don't back down.

Northern Nanny said...

OP Again,

Does anybody think that its totally out of line to pay a nanny $50,000 per year?

I should also note, that I work for a really well off family, whom own various businesses etc... if that changes anything which in my books it does. It's not as if they can't afford to pay me $15.00 net per hour.

Also, my services are financed by the head of the family rather than the DB/MB directly. I don't want to get into too much information so as to protect my identity and that of the family in case they read online blogs. But these factors are impacting my decision.

I feel that if they can pay their workers $40,000 to work an office job etc, why can't they pay me $50,000 for watching the most precious member of their family and doing a great job at it for three years already.

I am dreading having a sit down conversation with them, as I don't want to seem ungrateful and after-all if you factor in the FREE CAR FREE GAS, and FREE REPAIRS, then is that making up for the $4.00 pay-decrease?

Other nannies/parents out there, is it over the top to ask for $15.00 net, Free car, free work-gas, free insurance, free repairs, or would you maintain take home $11.89 and look at the gas, etc, as a "make-up" for the monetary cut?

Northern Nanny

OP said...

@ Bethany:

Do you happen to know a site for these calculators?

Phoenix said...

Im really not sure what your issue it. Your employers claimed x and you claimed x.

Are they not taking out your taxes as you go along? meaning FICA, State, Fed, and Medicare out of your paychecks. Do they use a payroll service?

Ok so I think what im understanding is that you and your emplyoers are claiming wages that are different from what you earn. You claim less than what you earned for a certain year. and you payined $2.k

Your employer is right you need to claim the actual portion. Why didn't you in the beginning?

Does your employer pay you cash? If they don't and they pay you by check your employer is at risk for an audit. Checks are legal documents showing your pay. If lets say you wanted to sue them for any reason at all. The courts could order his financial records to be searched to verify your salary.

The way you approach this situation is to stop be sneaky and pay your taxes on the wages that you earned.

You shouldn't even be asking this question. You need to talk to an accounant ASAP to see what other credits/deductions you can take out of your taxes. As far as your income is concerned, your hourly rate is a before tax situation. What you take home is always going to be different.

I don't know why your employers agreed to this to begin with.

I have a masters in accounting and I've worked witha a forensic CPA to search taxes and personal financial files for fraud cases. You have FRAUD written in red ink all over.

If your boss gets audited, you will get audited and you will get in trouble for not claiming your correct wages and you will be required to pay the IRS and state the difference plus fines.

Do you get a W2 drom them? Did you fill our a W4 to show them the number of exemptions you have? Did you tell them the tax rate you wanted so they can take it out of each pay check?

YOu can't pay someone for work and then only report have the income, especially when you are doing it to not pay your taxes.

I'm sorry but you really messed up. going forward go speak to a tax specialist or CPA. Have them review your income and expensses to see if you can claim any credits/deductions from your 1040. Otherwise you are going to be paying out the wazoo and you can't do anything about it

Phoenix said...

ok, nevermind.

I didn't see that you were not a US citizen, so i can't help you.

the only thing I can say it this. You can't report your income as being another amount from the one that you earned.

You earn $5k you report $5k

take home pay has nothing to do with your take home pay. You can't ask your employers to pay you more because you want more pocket money. Not only that when your salary goes up, so does your taxes.

I'm sorry but niether you nor your employer are right in this situation. You are not being "hosed" by anyone but the gov't

goog luck to you

Dr. Juris said...

Couple of good sites, OP:


Hope they help.

nycmom said...

The problem is that the vast majority of us are in the US and we would hesitate to opine on tax law in another country. Further, I hesitate to comment on appropriate nanny wages in another country especially as I was under the impression the US and Canadian dollars are somewhat different in value, and I have no idea if we are talking US or CA money here.

But... from a quick google it does look like many of the same laws apply in the US and Canada including that you are an employee not an independent contractor.

I would google around a big more if I were you, but then do as the article suggest and get local information from a local expert. I would ask the DB to pay for half or all and insist you guys do this the right way 100%. In the US, having you claim more wouldn't help the employer if you were an IC -- because by definition you are claiming those deductions. It actually wouldn't even help an employer for an employee because the Child and Dependent Care Deduction maxes out well below what one would pay a nanny. Same for a flex account.

But assuming a similar value in both countries, it is not unreasonable for you to be paid $50k after several years with the same family. It is on the high end especially for one child in preschool 15 hours a week, but if the family knows you are only there for one more year and already do a great job, I am sure they would pay it for continuity alone. $15 net is not unreasonable.

As an employer, I would not at all mind if you wanted to sit down and discuss this so we were all on the same page. I would be annoyed if I perceived it a demand with no discussion and it felt like extortion. But your situation does not sound like that. However, I would strongly recommend you go in armed with either an insistence on getting tax/legal advice together, or a print out of the laws and a strong grasp already. Otherwise, the double-talk will just leave you less empowered.

lmurph said...

Am Canadian - my employers take taxes out of every paycheque so I don't have to deal with any of it (I did have to remind them to give me my T4 at tax time, but considering your issues, I've got it easy...). Our salaries are actually the same right now, but last year at $12/hr I was able to get back...maybe 50% of my taxes as a refund. In my opinion, if your boss is going to make a big deal about you claiming your entire paycheck, then you get him to pay. He should be making CPP (to your pension) and EI contributions. That's what *should* happen. But I don't know whether it's what will - yeah, he could just find someone cheaper if he's an ass.

no name said...

RE-post for Anonymous...

Maybe your employer felt uneasy with the tax arrangement all along, but was caught off guard and didn't really know how to handle your request. Now maybe it's just too much for him and he feels he must insist that you do things perfectly legally. Just guessing...

That said, it never hurts to ask for a bit of a raise. After three years, that seems reasonable enough. Of course, it depends on the market for nannies in your area. If you ask for too much (especially since you plan on leaving in a year and he will have to look for a new nanny then anyway) he may just replace you now.

PS Always take responsibility for your own taxes. it is you in the end who will be punished if something is done wrong.

(*this was a great comment, you guys need to use monikers or they will get deleted!!)

Nashville Nanny said...

I don't think $50k is unreasonable. I make more than that for 2 children, and I've only been in my position for 3 months. I am surprised, however, that you work for a well off family and taxes are only now really being addressed/paid/etc. I've found that higher end jobs always want you to be on the books from day one.

Village said...

The rich want the poor and middle class to pay their taxes. It's the same in every country. The OP is being royally screwed. I would ask for $15 an hour net. You might get it, you might not. But I would go to the tax authorities in Canada, and spell this out for them. They might be most grateful. Some countries offer a percentage reward for turning in tax cheats. And if the employers are doing it to you, they are doing it to others as well. Sometimes 10% or 15% of the amount collected by the government is paid to the whistle blower. I'd check it out.

Bethany said...

The one I typically use doesn't have a Canadian option. Sorry I thought it did.

I found these online Maybe they will help:

Nanny in Calif said...

OP- just because they CAN pay you a higher wage does that mean they SHOULD. That has nothing to do with it in my opinion. You get paid for your job a s your duties, not how well off your employers are. We nannies are here to make a living but not take advantage of our employers. If we do, then we are just as bad as them.
That being said, yes they are taking advantage of you. In order to prove to DB that you need a raise, I would gather information on your country's minimum wage, what nanny agencies in your area charge/recommend for nanny salary, and if possible... Question other nannies in your area to find out what they make. Yes I know this is nosey, but the point is to prove to DB that you're making under average pay for nannies in your area.
No one on here knows your area or average/suggested pay. You'll have to find that out. The more facts you have in approaching DB, the more convinced he'll be. You can't argue with the facts. "My duties are x, y, and z. Local nannies are making this $ amount." Your pay may not be as bad off as you think. If anything you deserve a raise for working there 3 years.

weekend@bernies said...

You're grossly underpaid. $10 an hour is less than $2.00 over the minimum wage(here in California). I wouldn't see them offering use of their car as having anything to do with your pay. Its a perk that shouldn't have an impact on what you're paid every hour you work, it just doesn't make any sense. If they try to bring it up, you can let them know that nannys, who use their MBs car, as a rule earn them same as those who don't. In other words, you earn the same, car or no car. You should be earning about $15-20 an hour, in my opinion. I would NOT accept any offer that cheats the government out of the taxes. Its bad karma, if nothing else. Ask for $20 an hour and negotiate as low as $15. Others gave good advice to find what others nannys are making, contact agencies, etc. Also, if they refuse the increase or refuse to be honest with the taxes, register with an agency. You were planning on leaving in a year anyway. Don't stay at $10/hour! That's insanely low. You'd make more waiting tables. You need a contract, annual reviews and regular pay increases. No contract=major issuses!! Good luck. Please update us.

Northern Nanny said...

Dear Everyone,

Thank you all of the great advice and support.

I have been making a new contract, and plotting my conversation with the family that I will have by the end f the summer. I will do an updated post with results at this time.

All advice and perspective really helped me in trying to figure out my current situation which is quite confusing especially since I am emotionally involved!