Self employed issue

[futurepop]

Hi all,

My wife and I are both self employed and we have a registered corporation in Ontario. We both work on contracts for clients but my wife has been working with the same client almost for 3 years now and I have only 2 clients. Is this a problem?

[scotchandsoda]

Hi all,

My wife and I are both self employed and we have a registered corporation in Ontario. We both work on contracts for clients but my wife has been working with the same client almost for 3 years now and I have only 2 clients. Is this a problem? Two guys in my our office have just recieved letters from revcan, looks like they are in deep trouble as they are getting their tax recalculated for the last five years, they have been with this company for more than two years i've just started this year in contracting and am looking into a different way of getting paid rather than through my corporation, will update you when i find out more info.

[lana]

It could be a problem. I don't know if they are checking every registered corporation but a friend of mine got a call from Revenue Canada too. If you are a contractor it doesn't make sense to get paid as a full timer...The only suggestion that I have is to have more contracts during the year.

[philip]

It could be a problem. I don't know if they are checking every registered corporation but a friend of mine got a call from Revenue Canada too. If you are a contractor it doesn't make sense to get paid as a full timer...The only suggestion that I have is to have more contracts during the year.

You do have alternatives, check out the portable companies, or contingent employers, they charge between 0% and 5% depending on how your contract is set up. We have a number of people in the same situation and it works well, plenty of benefits and takes the admin away, I know of at least one person on this forum that has gone this route in the last month. I will drop them an e mail and ask if they can post on this thread to let you know how it worked out for them.

[futurepop]

Are you guys on payroll through your own company or you are withdrawing money from your corporate account when you need?
My accountant suggests putting me on payroll and I guess he knows better but what is your experience?

Thanks

[philip]

Are you guys on payroll through your own company or you are withdrawing money from your corporate account when you need?
My accountant suggests putting me on payroll and I guess he knows better but what is your experience?

Thanks

That’s the great bit about the system, you have the option and they run a tax like test for you so they can find the option to fit. The two main options are-
a. stay as a corp., and they bundle the services you supply up with other corp. members (paper work exercise) resulting in you having more than one client this alone may move you back on to the correct side of the tax system.
b. they pay you on payroll and allow you still to take out expenses tax free, they track these and give direction on how to maximise your tax free spending.

[lana]

That’s the great bit about the system, you have the option and they run a tax like test for you so they can find the option to fit. The two main options are-
a. stay as a corp., and they bundle the services you supply up with other corp. members (paper work exercise) resulting in you having more than one client this alone may move you back on to the correct side of the tax system.
b. they pay you on payroll and allow you still to take out expenses tax free, they track these and give direction on how to maximise your tax free spending.

This is interesting. Maybe it is worth trying although I don't know anybody using that system. Is it new? Don't you think it should be used only by people with big corporate income? Otherwise you just give them big commission, that’s all....

[philip]

Far from new it started in the UK in 1995 expanded to the US in 1999 and finally hit Canada in 2005. I can introduce you to a few people that are using the system, I know of one other that has recently joined from the postings on this page. The rough earning for users go from 40k -180k so big spread. No real reason it needs to be high or low as it is all based on %. Feel free to send me a pm and i will see if i can answer any questions you have.

[lana]

That's why I've never heard of it.
It is relatively new in Canada. Still I don't see a reason to sign up if I earn $40 000. The tax bracket is not high for such income.

Thanks for the info

[philip]

Pretty new in Canada yes, but it is taking off quite quickly.

It doesn’t cost anything to sign up but you would have to make the decision to work with it. You are right that the tax bracket for 40k is not that high, but you do need to consider two other pretty big things.
1. If you are working for a client and getting paid self employed or through your own corporation, then you may well be in breach of the revcan regulations and eventually they will reclassify you and collect fees and possibly spoil the relationship you have with your client.
2. Working through a full service corporation (or portable company) will open up other clients for you.

Let me know if I can add anything else, if you are earning $40k you can still make some good savings, its true not as much as if you where a higher earner. Still any money saved is money earned.