[daze]

Hi guys,

I recently started off working as a contractor for a company. I am incorporated but have never ventured down this road -- always worked as an employee. I have a business account with a financial institution where my billed hours are being EFTed along with the GST amount on them. What I wanted to know were as few things:

Any guidance on what I can deduct as far as expenses go? Any CCRA documentation I can read on this?
How do I understand what I will be owed at the end of the corporation's fiscal year in terms of taxes?

I know I really should speak to a financial accountant, but if anyone can chime in on their personal experience and/or advice, I would really appreciate it.

Thanks,

Daze

 

[Cal]

Yes you should consult w an accountant.

Expense anything business related....anything spent in your efforts to earn $.

I think Moneygal will have a link for you...

CCRA will want you to keep a log for your km driven to earn income...autoexpenses.

I am sure that the Revenue Canada website will have some info.

 

[Berubeland]

Are they your only client? You may have to get a ruling from WSIB to determine if you are indeed a legitimate contractor or not.

Also claim everything, % of rent, office supplies, lunch, car and much more.

Yes get an accountant it's probably a good idea to talk to them now and have them inform you about what you need to start keeping like receipts. Also perhaps a bookeeper.

 

[FrugalTrader]

Speaking of being a contractor, does anyone know the premium in pay a contractor would get relative to the same position held by a full time employee? The employer doesn't need to pay the contractor benefits, which is why I assume a contractor would receive a premium for the same position.

 

[bean438]

FT, why would a contractor get a premium?

Isn't the whole point of "contracting out" to save money, I.e. Get someone else to do your job for less money?

This is what many of the companies I worked for threaten us with.

Personaly I think contractors should get no tax breaks. Most of these guys work from a cell phone. And have no overhead.

I don't get to deduct my car/fuel to earn my T4 income so why should they?

If they are a "real" company with a payroll fine, but a painter who's office is his truck and cell phone? I think not.

 

[FrugalTrader]

When companies hire contractors, they don't need to pay CPP, EI, health/life/RRSP benefits which saves them a bundle. As well, they have no obligation to keep them once the contract is up. From my experience, an Engineer that is "contracted" will make 50%-75% more than the same full time employee.

 

[83gemini]

Just make sure you can properly demonstrate to the CRA you are a contractor and consider getting some preliminary advice to canvass such issues. The CRA may not be as stingy as bean438, but I'd suspect it's still stingy.

 

[Berubeland]

http://www.cra-arc.gc.ca/tx/bsnss/tpcs/slprtnr/bsnssxpnss/menu-eng.html

There is the list of allowable expenses for contractors.

In my experience contractors are not paid more. Even if you work for exactly the same wage the benefit of being able to claim your expenses before taxes is very beneficial. Conversely you can get let go much easier

The deemed benefit of being employed is that if you are laid off you get EI if you are sick or injured you get Worker's Compensation, employers are subject to labour laws. In short being an employee is less risky. Also you get maternity leave.

Being self employed in my experience is like being serially unemployed, you often do not know where you are working next and you are only so good as your last job. You need to be very mentally tough to deal with that level of uncertainty, you also need to be confident in your abilities. In my case with a husband and small child to support those dry spells are particularly stressful. It takes a long time to build a client base so you are always working.

http://www.taxtips.ca/personaltax/employees/employeevscontractor.htm

If you are deemed an employee it will be very expensive for you and your employer it is good to take the test below

http://www.cra-arc.gc.ca/E/pub/tg/rc4110/