Are you an employee or a contractor? The answer will determine your tax liability.
Are you an employee or a contractor? The answer will determine your tax liability.
Whether a worker is an employee or an independent contractor determines who must deduct CPP, EI and income tax, and which expenses can be claimed. Getting it wrong can lead to CRA assessments for years of unremitted payroll amounts, plus penalties and interest.
CRA and the courts look at the whole relationship: who controls the work, who provides the tools, whether the worker can make a profit or bear a loss, and the intention of both parties. A contract that says "contractor" is a starting point, not the answer.
Indus Canada CPA reviews engagements, helps businesses structure contracts that reflect the real relationship, and represents clients in CPP/EI rulings and appeals. We also advise incorporated contractors on personal services business (PSB) risk, where a corporation that is really acting like an employee loses access to the small business tax rate and most deductions.
Our team works alongside trusted legal and financial alliance partners to deliver coordinated tax strategy, compliance, and advocacy — so clients move forward with clarity and confidence.
CRA looks at the overall relationship, including control over the work, ownership of tools, chance of profit and risk of loss, and what the parties intended.
Yes. A business or worker can request a CPP/EI ruling on employment status, and the decision can be appealed.
A PSB is a corporation that provides services where the individual would reasonably be considered an employee if the corporation didn't exist. PSB income is taxed at a high rate with very limited deductions.
Have a Employee vs. Contractor matter? Book a free 30-minute call to talk it through with our team.
Book a Call