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Originally Posted by 19Yzerman19
FYI, if anyone is doing this now (incorporating and acting as a contractor in circumstances where you are for all intents and purposes behaving as an employee), don't. There is now a massively punitive tax penalty associated with this.
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This has always been the case - my understanding is that the CRA is simply becoming much more hardline on how they determine whether someone is really a contractor or an employee.
For instance, in my case, I work mainly (90%) from home in my own office, use my own hardware/software, and resist efforts from my clients to add me to their corporate directory and/or give me an email address.
But because I typically have one main client, with a couple very small clients throughout the year, my lawyer still determined I was at medium risk at being classified a Personal Service Business (PSB), which is the death knell from a tax perspective.
It's worth looking into. If you are labelled a PSB, you will pay tax at the highest rate (for almost gross income since writeoffs don't count anymore) plus be asked to catch up your payments for things like CPP that are normally ignored as a consultant. It's a double-whammy.
The rumor my accountant told me was that the CRA hosted a large "training camp" for auditors last summer in preparation for the crackdowns coming this year. Another rumor I heard was that the CRA contacted all of the O&G companies in Calgary and simply asked for a list of all their contractors.
I'm very interested to see if there is a real crackdown this year or not.