Are you an Employee or are you a sub contractor?

Many people do not really know who they are legally speaking, and it is very important to understand this in order to do your taxes correctly.

It is very important to answer the question, “Were you hired as an employee or as a sub contractor” before deciding how you are reporting your income on your tax return. and this can make a big difference in the result of your taxes.   Also just as important your employee also needs to have this clear before your are given your monthly pay check, so that they are reporting their monthly pay roll taxes correctly.   If the employer does not file their monthly payroll deductions they will have their own consequences to deal with.

Consider the following differences and then decide if you are an employee or a sub contractor.

Regarding the pay check:

  • If you are an employee
    • then the employer must submit all of the payroll taxes each month and deduct your portion off of your pay check.
  • If you are a sub contractor
    • then you receive the full remuneration and it is your responsibility to report your income on your tax return and then you pay the appropriate tax, E.I. and C.P.P. payment.

Regarding the Requirement for remuneration:

  • If you are an employee
    • The Employer controls your time schedule and task list and you are paid based on the hours worked.
  • If you are a sub contractor
    • The employer assigns the target goals and pays you based on completion of the project.   It may be a final payment at the completion of the project or it may in installments, but is based on the completion of the project.

Regarding Tools and supplies

  • If you are an employee
    • The employer will provide the tools and supplies for the job.   The employee’s only commitment is to provide time and skills.
  • If you are a sub contractor
    • Then you provide the tools, supplies, time and skills

Regarding your commitment

  • If you are an employee
    • As an employee you are committed to work for the employer during the time schedule agreed and all work is done on the employers work space and with their tools, at their risk.
  • If you are a sub contractor
    • Then you commit to have the project completed within an agreed upon time and you are in control of your work space and your schedule.   Any risks are your own personal risk.


This is a basic summary of the differences between an employee and a sub contractor.

For more information please go to the Canada Revenue Agency Website at the following link


Tax Returns = Refunds or Payments

  • If you are an employee
    • then the employer will submit pay roll taxes every month for you and then you will want to do your tax return with a focus of reclaiming so of the tax that was taken off of your pay check.
  • If you are a sub contractor
    • then you will not have paid tax during the year and it will be important to seek advice with doing your tax return to ensure that you claim all relevant deductions and credits to pay the appropriate amount of tax, E.I. and C.P.P. with out paying more than necessary.


I trust that this is helpful.

If you are a sub contractor and need help to prepare your taxes, then please call Tania Spears at 403-831-7821.  Tania can do your business bookkeeping, GST return and the T1 and T2125 business income tax forms for you.

Tania will ensure that you claim all your relevant expenses to ensure that you submit the return correctly and completely so that you are responsible and do not pay any unnecessary tax.

If you have any questions please call Tania and let us help you discover new ways save money.


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