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Breck Carter
Last modified: October 7, 1997
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Tip 73: Independent Contractor Questionnaire

How does Revenue Canada determine if I'm an employee or an independent contractor when I work as a subcontractor in the computer field?

The short answer is "It's impossible to know for sure!" because there is no definitive law or document that answers the question.

A slightly longer answer is "If you're talking about the Canada Pension Plan and Employment Insurance, it's easy!"

For all practical purposes, if you are incorporated, you're treated as an independent contractor. If you are operating as an unincorporated sole proprietor, you're an employee.

Don't fight it, there's no way around it, it's been that way for many years. Don't pay anyone to tell you different. About CPP and EI, that is.

Income tax is a whole other issue, and a whole other department within Revenue Canada. Different people, different rules, different implications.

The following list of 14 questions has been adapted from "Whose Business Is It? Employees Versus Independent Contractors" by Joanne Magee in the Canadian Tax Journal, 1997, Volume 45, Number 3.

In each case the right answer is "Yes". The more times you say "Yes" the more likely it is that the courts and Revenue Canada will regard you as an independent contractor. And that's a good thing, unless you like lower deductions and higher taxes.

  1. Do you control the When, Where and How of your work, as opposed to being closely supervised by the payer?

  2. Do you have other business activities that are integrated with the work you do for the payer?

  3. Can you work for other companies without getting permission from the payer?

  4. Can you hire and pay other people to do the work without getting permission from the payer?

  5. Do you assume any risks or supply any funds as part of the work?

  6. Do you assume responsibility for any losses, expenses or damages that you cause?

  7. Is there a foreseeable end to the work, as opposed to a continuing relationship?

  8. Do you pay for the use of or provide your own equipment and supplies?

  9. Do you use a separate office that isn't on the payer's premises?

  10. Are you ineligible for benefits normally provided to employees of the payer, such as pension, insurance, stock options, vacation pay and holiday pay?

  11. Would the payer survive without your services, as opposed to your work being an integral part of the business?

  12. Do you issue invoices to the payer and receive cheques in payment, but not receive T4 slips?

  13. Do you calculate your fee the same way as other independent computer contractors?

  14. If a contract exists does it support an independent contractor relationship?

You might protest, "I've registered my company name, I've had business cards printed up, I've paid for advertising, I've got a separate phone line!" None of that matters, it seems, just the factors described in the 14 questions.

Don't consider any of this "legal advice". For that, you need a lawyer. Your own lawyer, not the payer's lawyer.

Ask her, or him, to explain Wiebe Door. If he can't, move on, next contestant please.

And when it comes to legal fees, remember that Revenue Canada has more money than anyone.

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