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Employee vs. Contractor – Is Your Business Getting it Right?

Employee vs Contractor: What's right for your business?

New webinar highlights tax differences between employees and independent contractors.

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As the owner of your own business, you often rely on others to keep your daily operations running smoothly. However, the hiring and administration of employees and contractors can be a challenging area to manage, especially when it comes to taxes. For example, some business owners choose to take on self-employed independent contractors instead of employees as a way to bring down payroll costs, but it's important to remember that the CRA has strict rules about who might qualify as a contractor. If the CRA audits you and  determines that your independent contractors are actually employees, or vice versa, you could be liable for certain payroll or other taxes that you may not have considered.

If you're an employer, you can take action now to ensure you're properly complying with the rules before the CRA comes calling. Specifically, you should take a close look at your payroll records to ensure you've withheld and appropriately remitted any income tax, employment insurance (EI) and the Canada Pension Plan (CPP), premiums on both cash and non-cash payments, as well as your employees' taxable benefits. On the other hand, If you have contractors, you can help support their tax status by having proper contractual arrangements in place with them and appropriate supporting documentation. However, if the CRA determines an independent contractor that your company engages technically qualifies as an employee, you could be responsible for the employer's portion of CPP and EI premiums, as well as possible penalties for non-compliance.

To help you understand the tax consequences of employees compared to contractors, KPMG presents "Employee versus Contractor", the latest webinar in KPMG's Enterprise Tax on Demand series. Other upcoming short and specific Enterprise Tax on Demand webinars will focus on other important tax-related areas of your business.

To learn more about how proper planning can help when hiring employees or contractors, please contact Dino Infanti or visit our website KPMG private company tax.

Information is current to October 2, 2019. The information contained in this publication is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's National Tax Centre at 416.777.8500.

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