Employees vs. Independent Contractors
It's crucial to know whether your workers are employees or independent contractors. Big dollars may be at stake in the form of Federal and provincial assessed penalties resulting from misclassification. The validity of your company's pension plan may also be at stake.
A periodic review of the status of your workers to see if they are properly classified is critical, but the process isn't easy due to the complexity of the issue.
The Canada Revenue Agency has published a guide called “Employee or Self-Employed?”, which contains an extensive analysis to determine whether there is an employer – employee relationship or a business relationship.
The four factors which are considered are: control of the worker, ownership of the tools, chance of profit/risk of loss and integration. There is no litmus test for exactly how many factors must be satisfied, nor are the factors uniformly applied.
If you'd like to discuss these complex rules with us and see how they apply to your business in order to make sure that none of your workers are misclassified, please call our office to arrange for an appointment.
Claiming Automobile Expenses
One of the more common expenses claimed by taxpayers are automobile expenses (applies to any motor vehicle such as van, bus, pickup truck, station wagon, SUV or other truck). Many individuals use their automobile for work or business and incur personal expenses in doing so. It is important to note that only expenses of a business nature are eligible as a deduction against their related income. As such, the Canada Revenue Agency (CRA) has strict requirements in ensuring that only business-related expenses are claimed. As a result, the retention of automobile tax records becomes imperative for every taxpayer that uses an automobile for work or business.
Keep The Invoices
Improper input tax credit (ITC) documentation is one of the main reasons for GST/HST reassessments.
Proper invoices to support ITCs are required by Canada Revenue Agency auditors.
For example, the input tax credit may be disallowed if only the credit card slip is provided rather than the actual invoice. The supplier’s GST/HST registration number should be printed on the source document. Some clients use credit card receipts, bank statements, and cancelled cheques to substantiate the GST/HST input tax credits. However, none of these documents show the supplier’s GST/HST registration number.
Should You Incorporate Your Business?
If you own a business, you may have wondered if you should incorporate. Historically the income tax system in Canada has benefited incorporated Canadian small businesses.
Although the income and deduction calculations are almost identical to an unincorporated business, the major differences are in the corporate taxation structure and tax planning opportunities. When developing the tax plan for your business, you and your advisor should look for opportunities in the following areas:
• Income splitting with family members;
• Tax deferral to the future;
• Estate planning for you and your family;
• Utilization of the capital gains exemption; and
• Planning your retirement, including disposing of your business.
Since personal and corporate tax as well as family law issues can make this issue complex, please contact our office to discuss your situation.
Helpful Links:
Canada Revenue Agency: “Tax information and Registering for Business Number with Federal government”
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Canada Business: “Small Business Start Up Assistant & Business Planner”
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Ontario: Registering your business name online in Ontario
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MBT: Markham Board of Trade
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MSBEC: Markham Small Business Enterprise Center
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