If you work for yourself you probably already are on the CRA’s radar in one way or another. Self-employed workers and small-business owners are responsible for self-reporting their income and remitting their taxes. GST is also involved unless the total annual income is less than $30,000. A self-employed small business owner is much more likely to be targeted for audit than the T4-salaried employee. Expect the Agency also to pay much more attention to self-employed subcontractors. The Agency uses a complicated test to determine if a person is an independent contractor or an employee. If it is determined that a contracted individual is really an employee, both the employer and the employee will face stiff penalties.
You can, of course, appeal a negative decision to higher authorities. The Tax court will examine the nature and degree of control over the person alleged to be an independent contractor. They also consider if the work done is integral to the business or only accessory to it. In the latter situation, the taxpayer will be an independent contractor. There is also an economic reality test. The bottom line is that a court will review all the facts of the relationship in detail, and the results will vary from case to case.
If you are not sure where your working relationship falls, consult a certified tax professional or a tax lawyer.
The foregoing provides only an overview and does not constitute legal advice. You are cautioned against making any decisions based on this material alone. Rather, specific legal advice should be obtained in the context of your own particular circumstances.
