Many people assume paying a caregiver in cash keeps the situation simple, but this method has many negatives involved that outweigh the simplicity. Paying an employee under the table means you don’t get your tax breaks, the employee doesn’t get their benefits, and you could be in for steep fines and penalties later on.
Wave Goodbye to Tax Credits When Paying in Cash
Paying for your elder’s medical expenses, including the costs of a caregiver, may be claimed at tax time if certain requirements are met. If you pay the employee under the table you will not qualify for or receive these tax breaks. Paying with cash means you kiss those savings and credits goodbye and instead eat the cost of what you paid out for care. Check out the Canada Revenue Website for more info on if your elder caregiver qualifies and to find out exactly what you may and may not claim as deductions.
How Things Could go Wrong
You may think your employee is fine with getting cash payments, but there may come a time when they need to apply for unemployment insurance benefits. If the caregiver agreement ends, or if your employee needs to go on maternity leave, they may decide to file for this type of benefit.
Say Hello to Penalties, Back Interest, or Worse When You Pay Under the Table
While you may take the position that the caregiver was “self-employed” and tell the CRA that the employee was responsible for their own taxes, you likely won’t get a ruling in your favour. If a judgement is found that the caregiver should have been treated as an employee, you will owe all of the money you would have paid towards CPP and EI, plus interest and hefty penalties. If the caregiver employee worked for your family for a long period of time, you could end up owing a small fortune.
Keep it Legal with a FREE MONTH of Payroll Services
If you’re thinking about hiring an elder caregiver, or you already have one, make sure you keep things on the straight and narrow to avoid future tax related problems and to get the maximum savings on your personal taxes. If you’re on the fence about if your loved one needs help, check out our article on warning signs your elder may need help.
Doing the payroll math may feel overwhelming, but you don’t have to handle it yourself! We have you covered with a free month of our payroll service, plus affordable plans that fit into any budget. We will make sure you meet your provincial employment standards, we remit your taxes on time every time, and we take the guesswork out of the equation by doing the math for you. We also set up and maintain your CRA and WCB accounts, and we’re here for you —we calculate salary, wages, annual bonus, vacation pay, stat holidays, and anything else you might need. It doesn’t get any easier than this, it keeps things 100% legal, and you get your well-deserved tax breaks on your personal taxes!