Vancouver CPA | Be Careful When Contractors Wants to Be Employees
Take heed when Vancouver CPA warns you that employers have to be careful with contractors masquerading as employees or vice versa. Business owners will visit CPAs when they are about to go out of business or as a matter fact have already dissolved their businesses.
Vancouver CPA says this can be done unfortunately with retroactive payroll remittances. Sometimes penalties and interests, in fact because the contractors are going to be deemed employees by the CPA.
The successful well accomplished entrepreneur who’s quite used to being able to be respected by people and persuade them is the same entrepreneur who will definitely need to go toe to toe with the CRA. The reason for this is because the CRA doesn’t necessarily need to be flattered by anybody or doesn’t care who you are a review come from. Their sole purpose is to collect taxes from the government and be very judicious on who they accept as a contractor.
The CRA is going to call up and ask for details, but sometimes you don’t know that they in fact are the CRA. They are going together details in writing, on a phone interview, or an on-site interview, often with the owner. They are in fact going to isolate a couple of the technical contractors. They’re going to ask them dozens of questions. So that each not just what the entrepreneur or the accountant says. They will eventually get to the actual contractors to.
Then the CRA will see that these contractors are in fact employees. If that is a matter of fact is the case, then the CRA is going to send the owner of very big bill, potentially thousands are potentially hundreds thousands of dollars.
This the CRA doesn’t necessarily care about the passion that you have or the dramatic plea that you have given them, advises Vancouver CPA.
What essentially might happen is you know that you have a risk from within your business. You’re going to want to reduce that risk level, but it same time you also want to make personnel changes from within your business and switch people from contractors to employees. Sometimes there can be some extra costs of this to you. As well, you and not be well received by the people who have made their living being contractors for years or decades. Now you’re changing the rules on them.
A good idea would be taking the strategy of, when they are due for an interim incremental increase, also known as a raise, it might be a good idea and a good time to then move them. You can change the classification from contractor to employee at that time.
It will then be very well received as they view it as their raise rather than you changing the mechanism or the system on them all of a sudden.
Often times will happen is a big companies will bring someone on as an employee and the CRA will love that. The CRA will be getting their fair share of the tax and it’s easy.
Vancouver CPA dips into the psychology of entrepreneurs in when they have talked about how certain people, business owners, are wired the right way. The reason why they say that is because they could potentially be good in influencing people. They are so very used to getting away and having people bow to their whims, and their expectations.
Often times will happen is business owners will go through very passionate logical argument and feel at that time that they are safe with the CRA. The problem is that, however anybody can make a passionate, logical argument on both sides of the issue.
Vancouver CPA says what happens is often times they will go online and they think that they are all prepared with a couple of considerations in terms of contractor versus employee. If that’s what happens then you are considered potentially safe however this is not the case. If you make a great argument it’s just not going to work out in your favour. The ruling process is probably not going to go down the way in which you think it will between you, the contractor and the employee or the CRA. The argument, the drama, and the speeches are just not going to make any sense or when you any sympathy.
Your CPA will be able to reverse you on whether it is a good idea to incorporate your business. Often times the CPA will in fact about the fact that incorporation is probably the better bet to go.
A lot of the questions will be what is going on with this so-called contractor that people will start to be suspicious of them, including the CRA. The CRA will then turn their suspicion on the employer.
A lot of the questions that will be considered and will retain suspicion is are they responsible for their own training? Do they train themselves? Can they hire replacement to do their job, or are you insisting on that particular person doing that particular work, etc.?
Auditors will ask, does this person have any other clients? In fact, auditors will have a very long list of questions, potentially 50 or 60 questions long does this person have any customers? Does this person have insurance for his work, etc? New as well, says Vancouver CPA, a lot of the questions will be something to the effect of how did they get the work? Did they bid on the project to begin with or did you just tell them how much there going to be making? All the questions are going back to what’s the risk of profit and loss to this person.
There are two of the most important factors in terms of considering contractors versus employees. The number one most important factor is probably the risk of profit and loss, both to the employer and to the contractor/employee. The second biggest in factor is in fact the control.