Alan Baggett
2014-02-04 13:03:00 UTC
Is the babysitter an employee or a contractor? : CRA SOTW
By Jamie Golombek, Financial Post
If you regularly hire the same babysitter to look after your kids, week after week, are you obligated to withhold and remit CPP contributions and EI premiums?
This was the issue in a case before the Tax Court last month in which a Judge had to decide whether Ms. Mikhaylovskaya, a part-time babysitter with no set hours or availability, was an employee or a self-employed independent contractor for Tatiana Iarutina, a mother of two.
Both the Ms. Iarutina and Ms. Mikhaylovskaya intended from the outset and throughout the relationship that Ms. Mikhaylovskaya was to be self-employed. At no time did she seek to collect EI or CPP benefits. The assessment of EI and CPP by the Canada Revenue Agency, along with penalties, appears to have been triggered by the fact that Ms. Mikhaylovskaya reported her babysitting income on her tax return as "Other Employment Income" as opposed to self-employment business income.
Ms. Iarutina is an accountant with an office in the basement of her home, who was also required to meet regularly with clients outside her home. In 2008, she placed an ad looking for babysitter, to which Ms. Mikhaylovskaya, who was 67 years old at the time and retired, responded.
While Ms. Mikhaylovskaya looked at several potential babysitting positions, she took this job because "she was able to set her own hours to the needs she had, and it provided her enough for her financial needs."
It was up to Mrs. Iarutina to either arrange for Ms. Mikhaylovskaya's next work time as she left the current sitting time, or to telephone her and inquire as to her availability. Both women testified that it was, in fact, Ms. Mikhaylovskaya who decided if she would come and that Mrs. Iarutina had to work her schedule around her babysitter's availability.
While most of the time, Ms. Iarutina's children were babysat in their own home, from time to time, to accommodate the babysitter, they were cared for at Ms. Mikhaylovskaya's home.
The Judge reviewed the standard tests for determination of employee versus independent contractor, which include both the intent of the parties and control over the work performed.
As to intent, the Judge wrote: "I am satisfied that the relationship in fact maintained between Ms. Iarutina and the babysitter was consistent with the self employment they both intended and understood it to be."
In addition, the Judge concluded there was very little control over the babysitter and how and when she cared for Ms. Iarutina's children, which tilts the scale again toward an independent contractor service since the hours were based on Mikhaylovskaya's availability or discretion.
As a result, the Judge concluded that Ms. Mikhaylovskaya was not, in fact, Ms. Iarutina's employee and that the CPP and EI assessments should be cancelled.
***@cibc.com
Jamie Golombek, CA, CPA, CFP, CLU, TEP is the managing director, tax & estate planning, with CIBC Private Wealth Management in Toronto.
(c) Copyright (c) The Calgary Herald
-----------------------------------------------------------
Miss a Tax Tale Miss a lot!
Visit the CRA SOTW Library at http://canada.revenue.agency.angelfire.com
------------------------------------------------------------
Alan Baggett - http://taxcollectorsbible.com/ - Tax Collector's Bible
By Jamie Golombek, Financial Post
If you regularly hire the same babysitter to look after your kids, week after week, are you obligated to withhold and remit CPP contributions and EI premiums?
This was the issue in a case before the Tax Court last month in which a Judge had to decide whether Ms. Mikhaylovskaya, a part-time babysitter with no set hours or availability, was an employee or a self-employed independent contractor for Tatiana Iarutina, a mother of two.
Both the Ms. Iarutina and Ms. Mikhaylovskaya intended from the outset and throughout the relationship that Ms. Mikhaylovskaya was to be self-employed. At no time did she seek to collect EI or CPP benefits. The assessment of EI and CPP by the Canada Revenue Agency, along with penalties, appears to have been triggered by the fact that Ms. Mikhaylovskaya reported her babysitting income on her tax return as "Other Employment Income" as opposed to self-employment business income.
Ms. Iarutina is an accountant with an office in the basement of her home, who was also required to meet regularly with clients outside her home. In 2008, she placed an ad looking for babysitter, to which Ms. Mikhaylovskaya, who was 67 years old at the time and retired, responded.
While Ms. Mikhaylovskaya looked at several potential babysitting positions, she took this job because "she was able to set her own hours to the needs she had, and it provided her enough for her financial needs."
It was up to Mrs. Iarutina to either arrange for Ms. Mikhaylovskaya's next work time as she left the current sitting time, or to telephone her and inquire as to her availability. Both women testified that it was, in fact, Ms. Mikhaylovskaya who decided if she would come and that Mrs. Iarutina had to work her schedule around her babysitter's availability.
While most of the time, Ms. Iarutina's children were babysat in their own home, from time to time, to accommodate the babysitter, they were cared for at Ms. Mikhaylovskaya's home.
The Judge reviewed the standard tests for determination of employee versus independent contractor, which include both the intent of the parties and control over the work performed.
As to intent, the Judge wrote: "I am satisfied that the relationship in fact maintained between Ms. Iarutina and the babysitter was consistent with the self employment they both intended and understood it to be."
In addition, the Judge concluded there was very little control over the babysitter and how and when she cared for Ms. Iarutina's children, which tilts the scale again toward an independent contractor service since the hours were based on Mikhaylovskaya's availability or discretion.
As a result, the Judge concluded that Ms. Mikhaylovskaya was not, in fact, Ms. Iarutina's employee and that the CPP and EI assessments should be cancelled.
***@cibc.com
Jamie Golombek, CA, CPA, CFP, CLU, TEP is the managing director, tax & estate planning, with CIBC Private Wealth Management in Toronto.
(c) Copyright (c) The Calgary Herald
-----------------------------------------------------------
Miss a Tax Tale Miss a lot!
Visit the CRA SOTW Library at http://canada.revenue.agency.angelfire.com
------------------------------------------------------------
Alan Baggett - http://taxcollectorsbible.com/ - Tax Collector's Bible