What are the risks of contracting services vs. being employed? The Courts and Canada Revenue Agency (CRA) consider several factors in determining whether an individual is a contractor or an employee. Key factors include: the degree of control exercised over business decisions; ownership of tools and equipment; the ability to substitute another person to do the work; whether there is a chance of profit or the risk of loss; and responsibility for investment and management. For further information on these factors, consider our previous blog regarding Contractor vs. Employee.
If a contractor is deemed an employee, additional tax liabilities such as CPP and EI are assessed to the employer. The contractor could also be subject to additional taxes and reassessed for expenses otherwise not deductible for employees.
Your contractor accountant provides advice regarding contractor vs. employee tax assessment criteria.