Recently, the Canada Revenue Agency completed an audit on my construction business. I was fined for payroll taxes for three years including penalties and interest. I have up to three workers that work on an “as needed” basis and see no reason to do payroll. Who is right? This would bankrupt my business. — Vince
Generally, many small businesses prefer to treat workers as “independent” because of time and payroll cost. The CRA would prefer the opposite. On one hand, an individual that works for one company, at hours specified every day for a fixed amount would be considered an employee. Comparatively, an individual that provides services to several companies using his/her own expertise, independently prioritizing work and degree of service is considered self-employed.
Some factors to consider: Who determines when, where and how the services are to be performed? Is the working individual an integral part of the company? Do your self-employed individuals bear economic risks such as financing equipment and tools and obtaining sufficient clients to succeed?
Get a tax accountant that can help ASAP.