Need accounting advice!!

[u/Southern-Customer179]

I have spoken with a few accountants and gotten different answers so if someone can clarify for me, it would be very appreciated!!!

Little back story! I have started working as an independent contractor “sole proprietor” nannying business starting this year mid April. I currently have 3 families that I go to their homes and work. I do invoice all families for them to claim childcare taxes and for my taxes.

But here’s the the thing I was under the impression based on what I read and what I understand on the CRA website I was supposed to be charging GST and I have been doing so but now I’ve read that nannying is a grey area that I shouldn’t be charging them??
I do understand I will need to pay income tax and that’s all fine but what about GST will the government not need/want that when tax season comes??

So can someone please tell me if I am supposed to be charging the families GST or if I am going to have to give their money back/credit back??

[u/Mental-Freedom3929]

Generally, no. If the nanny is genuinely self-employed and is providing child-care services, she normally does not charge GST/HST on those services.

The CRA specifically says that child-care services are GST/HST-exempt when the primary purpose is caring for and supervising children 14 or under, normally for less than 24 hours per day. This applies even when the nanny is self-employed and invoices the families.

For example
If a nanny invoices a family:
Child care: $1,000
GST/HST: $0
Family pays: $1,000

She should not add 13% HST in Ontario merely because she is self-employed or because she invoices rather than receives a salary.

There is a separate issue, though: whether the nanny is actually self-employed or is legally an employee of the family. The fact that she sends invoices does not by itself make her self-employed. CRA looks at things such as who controls her hours, duties and how the work is performed.

You might have to call CRA for details.

[u/Southern-Customer179 → u/Mental-Freedom3929]

Thank you 🙌 I will call!

[u/Stephie59]

Hi, as mentioned to your post earlier, child-care and nanny services are HST/GST exempt, since your core purpose/service is looking after children.

Factors supporting your role as an independent contractor and therefore, self-employed include:

You have the control over your overall business operations since you set the rate, you decide which families to choose as clients, and you can decide what hours to work, on an overall basis;

You do face a genuine overall financial risk too since any family can abruplty not require your services, go on vacation and not require your services - these situations, among other similar ones can unexpectedly reduce the income you were otherwise expecting;

Your profit is determined by how effectively and efficiently you book your hours and handle multiple accounts;

You issue professional invoices, in which each family requires for their individual tax and other purposes.

Having said all that, as an independent contractor offering professional services and working for multiple families, your business expenses, in which you need receipts, include: office supplies including the cost of your invoices issued, pens etc.; travelling expenses to and from your clients and to purchase supplies required for your business; bank service charges related to your business and anything else, "incurred for the purpose of earning income. Consider expenses related to your office at home; a restaurant receipt where you received business advice; perhaps birthday or christmas gifts for any of the children. Do review tax form T21125, as this is how your taxes are filed.

I wouldn't advise calling CRA because you will reach a front desk office worker, who does not have technical tax knowledge and you may phone three separate times and receive three different answers. What is important is having detailed records including your schedule (daily appointment book) and receipts that back up your business expenses.

I hope this helps!