Do you know the difference between an independent contractor and an employee? This video from www.TaxTV.com will help answer that question. The distinction between an independent contractor and an employee is important. If the worker is an employee, then the employer is responsible for withholding taxes. For a full, printable tip sheet please visit http
This article was published at Accounting Services of Charlotte, NC
The Canada Revenue Agency (CRA) is once again scrutinizing small businesses for how they classify employees vs vs independent contractors. Small businesses are often reluctant to hire employees because of payroll taxes, benefits and severance pay. The workers want to be hired as independent contractors to enjoy the benefits of deducting significantly more expenses.
The courts have provided these guiding criteria for the correct classification of worksers:
You are likely to be considered self-employed if:
- You control the time, place, and manner in which you perform your activities;
- You supply your own equipment , and cover the rental and maintenance costs;
- You make a profit or incur a loss, and cover your operating costs; and
- You integrate your client’s activities into your own business activities.
You are likely to be considered an employee if your employer:
- Decides where, when and how work should be performed.
- Dictates your working hours.
- Determines your salary.
- Supervises your activities.
- Manages your performance and assesses the quality of your work.
Business owners and contractors should be aware of these guidelines and should be able to defend their positions based on the criteria outlined above.
ca4it.com CA4IT has been a pioneer among chartered accounting firms with respect to the Personal Services Corporation (PSC) or sometimes called the Personal Services Business (PSB) income tax issue. Many of CA4IT’s first incorporated IT contractor clients and other independent professionals came to CA4IT after being turned away by other chartered accounting firms who believed that all such small corporate clients were definitely PSC’s. PSC risk may also apply to other independent professionals like consultants, engineers and project managers. I’d also like to tell you about what CA4IT has done to assist and protect our clients regarding this matter. Independent contractors benefit from the following income tax advantages: 1- Income retained in the corporation qualifies for the small business deduction resulting in a low corporate income tax rate of approximately 15.5%, 2- Overall income tax can be lowered using income splitting to pay reasonable salaries and dividends to family members. 3- The corporation is entitled to deduct a fairly broad variety of business expenses that were incurred in order to earn business income. This business video addresses the risks and benefits associated with the Personal Services Corporation or Personal Services Business CRA income tax issue. For more tax tips videos on how to reduce your personal taxes and business taxes visit out tax tips resources at ca4it.com We also have a series of videos on interview tips, resume tips and cover …
This article was published at Accounting Services of Charlotte, NC
