We are seeing an increase by CRA towards incorporated independent contractors who work through their own incorporated companies. It appears that CRA  are now targeting independent Contractors who do not have 3 to 5 different sources of income throughout each year and are contracted and working  consistently for one company, thus in CRA eyes of having only one source of income are at risk the most. CRA are re classing  them them to be employees in disguise of the companies they are contracted to or employees of their own incorporated small businesses.

In each of these scenarios the contractor will lose their small business tax benefit and any expense deductions and are classed as employees of their own companies. The result can be corporate taxes of 38% to 44% of the gross income of the company and all income taken from the company by the owner taxed at T4 income rates which are the highest income tax rates. CRA can go back as many years as they see fit when auditing your company.

We have heard that this has resulted in upwards of $50,000.00 in reassessed taxes owed to CRA and resulted on the bankruptcy of the independent contractor and his company.

If you have any concerns about the status of your company’s contract position – please give us a call.      We provide a free consultation service to find solutions specific to you need and will assist you in keeping you out of CRA,s grasp.