Employee or contractor? The answer affects how you pay taxes and what benefits you pay into, including CPP and EI.
People often ask CRA to rule on what kind of worker they are in order to determine if their earnings are pensionable under CPP or insurance under EI. In fact, CRA gets over 40,000 requests each year and issues more than 80,000 ruling letters annually.
The Office of the Taxpayers’ Ombudsman found weaknesses in this process and released its report today. The OTO summarized that report, and CRA’s reaction, in a series of tweets.
CRA is more likely to consider a worker an employee if:
- the employer has control over the worker’s activities;
- the employer provides the worker’s tools and equipment;
- the worker cannot subcontract her work or hire assistants;
- the worker does not bear financial risk while working for the employer; and
- the worker has minimal opportunity for profit, outside an employer-sponsored share plan.
The ombud recommended the following to the Minister of National Revenue:
- CRA should provide information in CPP and EI rulings letters explaining that workers and payers have the right to request a copy of their CPP/EI Rulings Report, and instructions on how to request the reports.
- Where applicable, rulings letters should inform the workers and payers that an amount owing or over-contribution may result from the decision.
- CRA should update the relevant sections of its publications and webpages to clearly communicate with the workers and payers involved in a CPP and EI ruling about what they need to do after a ruling is made, including the steps required by workers and payers to pay any outstanding CPP contributions and/or EI premiums.
- CRA should continue to include in their CPP and EI rulings letters the name and telephone number of the rulings officer and an invitation to contact the rulings officer to receive an explanation of the rationale behind the decision; and reference to the “Have you received a CPP/EI ruling?” website.
- CRA should determine whether it can include an explanation of the relevant factors within each rulings letter.
In a tweet, the ombud says CRA has accepted “four of our five recommendations fully, and one in principle, and has taken steps to implement them.”