Vancouver CPA | Take Caution to Heart with Employers and Contractors
Vancouver CPA hopes that never comes down to this, and that people are generally very honest in business. However, if a employer decides that they want to remit contractors as employees, and employees, as contractors, that could be very detrimental to their business.
Vancouver CPA says the CRA will definitely take to heart the fact that this is not a good practice and that they will be missing out on a lot of potential tax that they could be receiving. This in fact happens a lot when a successful, well accomplished entrepreneur, who feel as though they have been in the game for a very long time and know all the ins and outs, and whose used to being able to persuade people. In this case, the CRA views them as does the same ruling time and time again. The argument that these people who are working for me are in fact contractors, not employees must be proven. The CRA is going to call up and ask for specific details. Sometimes you don’t know that they are calling on this issue as they will not introduce themselves as part of the CRA.
They are going to gather details in writing or potentially over a phone interview, or an on-site interview in person as a matter fact. This is often as well done with the owner. They are going to isolate a couple of the so-called contractors and ask them the questions. The reason for this is because each contractor is just not what the entrepreneur or accountant says. They will eventually get to the actual contractors within the business as well, warns Vancouver CPA.
Then the CRA will see that these so-called contractors are indeed employees. Then the CRA is going to eventually take it back to their office, contemplate the case, ramifications, and penalties. Ultimately they will be sending a very big bill in the mail. Often times this big bill is going to be tens, if not hundreds of thousands of dollars for the small business. As you might imagine, this could be detrimental if not fatal for many small businesses. The CRA doesn’t care about the passion, or the theatrics that you have and put forth. All they care about is that you pay your fair share of tax and that you are not dodging any specific legalities.
It is a fact of life that they can in fact collect tax and they can say that they are going to have to pay the withholding tax. Oftentimes, the CRA does overlook the withholding tax. You can be sure however they absolutely will not overlook the CPP and the EI taxes. You will definitely have to pay the CPP and the EI and potentially this will be retroactive. This potentially will be how it looks. You have to be the CPP and the EI that you would’ve deducted from the employee/contractors checks retroactive back for potentially years. And they will ask for both sides, the employees and the employer’s.
You might in fact no, says Vancouver CPA, as an employer, that you have considerable risk from within your business. You are definitely going to want to reduce that risk level but at the same time you think it’s a good very good idea in order to switch people and mix it up your and switch them from contractors to employee. Sometimes there can be a lot of extra costs to you, the employer, and the business,. Likewise, this may not all be well received with your employees/contractors. A better idea would be to wait until they are do for a raise. That might be a really good time to move them and change the classification from contractor to employee. Will happen is this will be very well received in the they feel as though it is a promotion, and a raise for their hard work and devotion.
You will be able also to tell them that also, if you want to make more money, you will have to incorporate, and this is a very good time in which to do so. You can do it in conjunction with a raise, sometimes don’t rock the boat so much.
Vancouver CPA says that yes in fact they will be able to collect tax. They can say that they are going to have to pay a lot of the withholding tax. New although, the withholding taxes and often taken to consideration as it is minor at best.
Vancouver CPA says what the CRA is in fact going to go after is the CPP and the EI payments. You will definitely have to pay the CPP and the EI in that you would’ve deducted from their checks, retroactive back from days, weeks, or even years. And they will ask for both sides payments. The employees and the employers. This could be in excess of a five, six, or $7000 the and penalty per employee. As well, consider the penalties and interests, and multiply that by the number of years.
Love times will happen is the CRA will be wondering what is going on with this so-called contractor? They will be asking questions such as, are they responsible for their own training? Do they train themselves? Can they hire replacement to do their job. Or are the you insisting on that particular person doing that particular work?
Auditors will ask in turn, does that person work with any other businesses or clients? The list of questions that the CRA is going to interrogate you with, is huge, potentially 50 to 60 questions long. Does this person have any other customers? Does this person have insurance? What costs are they responsible for?
Are they buying materials and supplies? The question, “can they hire a replacement” is a huge question that is often asked all the time. Also who is training them? Who and how are the hours and the schedule set, etc.?