Vancouver CPA | Contractors and Employees Must Be Cautious
Vancouver CPA says that there are lot intricacies and a lot of potential risks associated with hiring contractors versus hiring employees.
Business owners that visit CPAs when they are about to go out of business or have already in fact, the business and lost everything, their whole life savings, potentially by retroactive payroll remittances, penalties and trusts, etc. This is potentially because of the fact that the contractors are going to be deemed employees by the CPA.
A lot of the times business owners will come to the CRA and say they’ve been in business for maybe one, maybe five, or maybe even five or 10 years or longer. They say that they technically haven’t had a problem yet with the CPA.
However, what happens is that say for example a smoker does the same thing and follows the same philosophy. It eventually is going to definitely catch up with a smoker.
It is the same thing with business owners, says Vancouver CPA. It’s eventually going to catch up with them
It’ll basically work until it doesn’t work. At least a very challenging time is definitely head of them. Ideally, this is a very small sample size of success and it is definitely stated that we.
Vancouver CPA says the big conglomerated companies can potentially bring on 70 as an employee and the CRA is very accepting of that because they’re going to get their share of the tax. It’s as easy as that. Then if you bring on an incorporated contractor the CRA doesn’t necessarily a care about that either because there is an incorporation involved and it is not of importance to the CRA. The problem however is all the risk is when you hire an unincorporated contractor.
All the risk is and the big companies are not going to hire unincorporated companies. This is almost rule number one in business. It is a common thought and practice that you do not hire unincorporated companies!
Consider the fact that successful well-rounded and will accomplishment burners whose used to being able to persuade people, except the CRA. The CRA has seen episodes of that and examples of that many times before. It doesn’t necessarily phase the CRA and they don’t care one bit about it the argument that these people who are working for me are in fact contractors not employees is a very popular argument and they have seen all the drama before.
They are going to gather details in writing with the company, with the owner, with the with the on incorporate a company or with the contracted people.
It definitely won’t work very well in their favour as they are going to gather details in writing, on a phone interview or on an on-site interview. Often with the owner. They are going to isolate a couple of the so-called contractors and asked them in the neighbourhood of potentially 40 to 50 different types of questions. In fact it can be more of an inquisition or an interrogation that can be a question.
It is in fact the single most important factor, explains Vancouver CPA! There’s a lot of considerations on specific questions that they are going to in fact ask. These specific questions are potentially of all about their insurance and whether they have it or not, do they have other customers, etc. But what is their risk of profit and loss essentially? If you ideally profit from a business, it goes well until it doesn’t go well and you lose money. It goes well and you will absolute profit, however when it doesn’t go well it really doesn’t go well, and you could lose your business.
Vancouver CPA will warn you that they look at the so-called contractors and asked if there is a risk that they are actually going to lose money? That’s one of the most important risk factors. All those questions that they are going to ask lead back into that same rationale. It is the rationale that the person is either a legitimate business owner with a chance for profit or an illegitimate business owner with the risk of loss.
It is common practice that they can in fact collect tax. They can say that they are going to have to pay the withholding tax. It is a common practice that they won’t generally go after your withholding tax however. As they consider the fact that it is small change versus the CPP and the EI.
This is certainly a factor that they are in fact going go after CPP and EI. Consider that a fact and you should definitely be expecting that.
If that is indeed the case you’ll have to pay the CPP and EI retroactive to potentially years back. And they will ask for both sides, the employee and the employer decides. If you do the math, that is essentially nine, 10, or $11,000, per employee, plus penalties and interest, multiplied by the number of years. Sadly, that is tens, maybe hundreds of thousands of dollars that you are going to indeed need to pay the government.
You, says Vancouver CPA, as the employer might in fact know that you indeed have a risk from within your small business. You’re going to want to reduce that risk level but at the same time switching people from contractors to employees is something that may not be a good idea and it will be viewed with extra costs and a lot of pushback. You can get a lot of pushback because potentially these contractors have been in fact living under that umbrella and working with an umbrella for a very long time and all of a sudden now you’re changing the rules.
When in fact they are due for an incremental increase, essentially raise, that might be a very good time strategically to move them and change the classification. You can then indeed change the classification from contractor to employee and it will be very well received.