The term ‘war’ may be a bit misleading here, but who would have thought that being self-employed would require wearing body armor to defend yourself from CRA inquiries!
In an effort to ensure Canadians are paying taxes, there’s been increased scrutiny over business expenses and the status of a contractor/self-employed person vs. an employee.
As the June 15th tax filing deadline has come and gone, I have seen people make an effort to UNDERSTATE their expenses to avoid CRA asking questions in fear of spending time and money on an audit. Wow, that’s a thing? Well, apparently, it is.
The other combative topic noted is the status of a self-employed person vs. an employee. There are advantages to both, but CRA generally likes to see people being paid by an organization that withholds tax. This increases Government cash flow, helps contributions to CPP, EI, EHT and other social programs, so of course there’s a bit of a bias here.
So what advice to we have to win the battle and the war? Keep good back up for your expenses and be cautious when utilizing long-term freelance workers.