When hiring a family nanny or caregiver you may think that they are an independent contractor. However, since you are the one in control of the environment in which they work, how they perform their job as well as the hours worked, they are considered to be your employee. As an employer you will be entirely responsible for paying certain types of taxes.
The first step is to register as an employer with the Canada Revenue Agency (CRA) and get a business number. Next is calculating how much you should deduct from the caregiver’s paycheque for income tax, employment insurance (EI) and the Canada Pension Plan (CPP). These amounts will need to be remitted to the CRA on a monthly basis. You also need to maintain a record of all remittances for when you file your personal income taxes and give your caregiver a T4 slip with your employee’s total gross earnings and total deductions for income tax purposes.