Ask HN: Canadian incorporated employees, how do you deal with the CRA risk?
More and more companies demand that you as a developer work for them as an incorporated employee: you should be an employee (9-5, no autonomy, 40h/week, cannot subcontract, told where when and how to do the work) but they want to pay you as a contractor to save money and let you go easily. They demand you incorporate so that when the CRA catches you and deems you a personal services business or incorporated employee, you are personally on the hook for the 40% tax rate and penalties rather than the employer/client if you were not incorporated.
Small startups do it, huge corporations do it (banks, telcos...) It looks like an offer for these jobs is contingent on incorporating and taking on the risk.
How do you deal with this situation? Is the risk worth taking? Have you been caught and it ruined your life + profits? Did you pass on the job or were you able to work as a proper employee?
3 comments
[ 1.9 ms ] story [ 20.8 ms ] threadGenerally speaking I do not give course to such employment offers, in other the tax rate for incorporated individuals/small business is too high.
In regards to thw reasoning behind this, I believe it's mostly a question of company culture and perhaps the expenses the employer needs to pay (gov tax, etc).
I agree, it's the company wanting to evade taxes but getting you to incorporate so that all the risk is shifted on to you. I suspect it is also to lower your leverage because you don't get EI if laid off so they can push you harder without repercussion. Not even mentioning how easy it is to get rid of a contractor without notice or severance vs an employee.
I wonder why so many accept it, I suppose people don't realize how drastic the punishment is if you're deemed an incorporated employee and only think about today's savings by paying a 15% tax rate.