|Page 7||APEGGA Forum Told Taxman Eyeing
The rules havent changed. But Revenue Canada is taking a much closer look these days at the issue of independent contractor versus employee, two accountants told more than 60 people at a Jan. 26 APEGGA Information Forum in Calgary.
And the results are sobering, said Susan Leach, CA, and Sonia Draper, CMA, KPMG managers in Calgary. In 90 per cent of cases, Revenue Canada rules the person in question is an employee, not a contractor. As well, the scrutiny of an individual often leads to a broader look at the employers relationship with all its contractors and perhaps to the way it handles such things as GST and payroll taxes. Calgary is a particularly active area for such audits given the large number of contractual relationships.
"Revenue Canada is not changing the rules. Theyre enforcing the rules," said Ms. Leach, senior manager with KPMG in Calgary. In recent years, she noted, the hiring of hundreds of extra auditors in large part to unearth the underground economy has given Revenue Canada the resources to pursue such matters more vigorously.
"REVENUE CANADA IS NOT CHANGING THE RULES. THEY'RE ENFORCING THE RULES."
The good news is Revenue Canada has recently published an easy-to-follow guide - Employee or Self-Employed? (RC4110). The 15-page publication features a list of questions to help determine the relationship between workers and employers. It is available at Revenue Canada offices and through the Internet at www.rc.gc.ca (click on "Frequently Listed Publications").
In determining the nature of the relationship, Revenue Canada applies a number of tests, under four categories. One looks at whether or not the employer controls what the individual does and when, where and how they do it. Another looks at whether an individual is paid on a regular basis regardless of outcome (likely an employee) or has a chance of making a profit or risking a loss (likely an independent contractor). A third examines whether the employer or individual owns the equipment required to do the work.
"Its very important to keep in mind there is no one test that will be decisive," said Ms. Leach. "Not all the facts are relevant in all cases. You have to look at the whole relationship and weigh all the factors."
Independent contractors can do a number of other things to increase their chances of being deemed a self-employed business by Revenue Canada, said Ms. Draper, KPMGs manager of international executive services. These include maintaining multiple clients, having written terms of agreement and termination, invoicing consistently, carrying liability insurance and negotiating fees on a project basis.
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