Personal Taxation Q 'n A

My new employer asked me whether or not I wanted to be an employee or sub-contractor. Does it make a difference?

Whether or not you are an employee or self-employed as a sub-contractor is a matter of common law principals and not necessarily any agreement between you and the person paying you. There is no strict rule as every situation is different. There are well established guiding principals which are used by CRA and the courts to make this determination. Four major considerations are: Control, ownership of tools, risk of loss, and economic dependence. Depending on who directs who, how and when work is to be prepared, you may be considered either employed or self employed. Whether you own your own tools of the trade vs. using tools provided by the person paying for your services is a determining factor. Which party bears the risk of loss on a project is also a key consideration. If you are going to receive payment regardless of whether or not the person paying for your services makes a profit, you might be considered an employee. How much of your annual income is dependent on the payee is also a determining factor. The greater the percentage your income comes from one source, the more likely it is you are an employee. CRA publishes an extensive guide on determination of employment status.