Taxes as an Independent Contractor hired via University Co-Op while still a student?
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Thread: Taxes as an Independent Contractor hired via University Co-Op while still a student?

  1. #1
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    Taxes as an Independent Contractor hired via University Co-Op while still a student?

    Hey everyone! First time poster here! I'll try and keep my question brief.

    So in January 2016 I began an 8-month Co-Op work placement through my university at a testing company. They employed me as an Independent Contractor so they did not deduct any taxes. All together, I made $17,436. I know that I will have to pay the taxes for that amount, but I have no idea how to go about it since:

    - I was technically still a full-time student, paying tuition fees for the Co-Op placement.
    - My employment situation does not really follow the CRA guidelines for an Independent Contractor (my employer provided all my tools as I worked in a typical 9-5 office, employer directed/supervised the training/work that I did, I had no control over my hours or pay, I was an integrated part of the company).
    - I have no expenses, no business name, no GST number, investors, etc. I read many "Employee or Independent Contractor?" articles and I have zero qualities that would make me an independent contractor, let alone self-employed. Minus the CPP/EI/Income tax situation, I fall into the "employee" category.

    I usually just file my taxes through Turbo Tax, but this entire situation is giving me a headache. While I understand that I'll have to pay some taxes, I really don't think my situation calls for paying thousands of dollars in taxes since I was a student the entire time (TurboTax was giving me a ~$4000+ owed figure.......). I'm assuming I'll probably have to pay an accountant this year? What should I expect to pay in taxes?

    One more confusing tidbit: I also have leftover carry-forward amounts from previous years of tuition (~$25,000 worth). Shouldn't this lower my taxes owed amount, too?

    Any help you can give me would be greatly appreciated! Thanks everyone


  2. #2
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    I'm not an expert, but I have a few observations...

    1. If this was your only income for the year I can't see how you would owe $4,000. I suspect there is something entered incorrectly in TurboTax.
    2. TurboTax is likely calculating CPP and EI contributions since these amounts were not deducted at source. This would be part of the $4,000 amount.
    3. I believe CRA will assess your employer their share of the CPP and EI contributions.
    4. You should let your co-op department know that the employer treated you like an independent contractor. This may violate the university policy. Otherwise you should have been informed when the opportunity was presented to you.

    There are others on this forum who know a lot more than I do who will likely confirm or correct my observations.

  3. #3
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    Yeah, your "employer" probably treated you as a contractor for their convenience, not yours. However, sometimes finding coop partners is difficult if they aren't allowed to treat you this way.

    In any case, report your employment under Line 104 - Other Employment Income, and include a note as to what it was from.

    As others have said, if this was your only income ($17,436), and you have various tuition and education amounts you can deduct, $4K due seems high considering the basic personal amount for 2016 is $11, 474.

    I see Trustee already mentioned that the "amount Due" calculated by your program may include CPP contributions that you owe, not just taxes. But it still seems high. It also suggests you reported it as self-employment income (Lines 135-143), where 2xCPP is mandatory. I'm pretty sure you don't have to pay CPP on Line 104 Other Employment Income.

    Of course, if you want to contribute to CPP, report it as self-employment income. But you will have to pay double rate unless you can convince CRA to go after the employer for it. But that may be a can of worms you don't want to open.
    Last edited by OhGreatGuru; 2017-02-17 at 07:46 PM.

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    Quote Originally Posted by RussT View Post
    I'm not an expert, but I have a few observations...

    1. If this was your only income for the year I can't see how you would owe $4,000. I suspect there is something entered incorrectly in TurboTax.
    2. TurboTax is likely calculating CPP and EI contributions since these amounts were not deducted at source. This would be part of the $4,000 amount.
    3. I believe CRA will assess your employer their share of the CPP and EI contributions.
    4. You should let your co-op department know that the employer treated you like an independent contractor. This may violate the university policy. Otherwise you should have been informed when the opportunity was presented to you.

    There are others on this forum who know a lot more than I do who will likely confirm or correct my observations.
    Happy to read your observations!

    I had other income, but that was ~$5000 from another part time job I had later in the year (where taxes were properly deducted). Definitely not an astronomical amount. Another user below recommended entering this income on Line 104, which I will be giving a try! It makes a lot more sense than considering myself "self-employed." Although it is frustrating that the accountant at the company made it VERY clear that they don't issue T4s/are not responsible for CPP/EI and that I'm responsible for any income tax. Which, I get, but I'm definitely not an independent contractor as the CRA defines it.

    I definitely will be letting my co-op office know about this. I'm lucky that I had a feeling I'd owe a moderate amount and set aside some cash just in case, but I know so many people my age who have no clue about basic taxation...and, well, they'd be screwed.

  6. #5
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    Quote Originally Posted by OhGreatGuru View Post
    Yeah, your "employer" probably treated you as a contractor for their convenience, not yours. However, sometimes finding coop partners is difficult if they aren't allowed to treat you this way.

    In any case, report your employment under Line 104 - Other Employment Income, and include a note as to what it was from.

    As others have said, if this was your only income ($17,436), and you have various tuition and education amounts you can deduct, $4K due seems high considering the basic personal amount for 2016 is $11, 474.

    I see Trustee already mentioned that the "amount Due" calculated by your program may include CPP contributions that you owe, not just taxes. But it still seems high. It also suggests you reported it as self-employment income (Lines 135-143), where 2xCPP is mandatory. I'm pretty sure you don't have to pay CPP on Line 104 Other Employment Income.

    Of course, if you want to contribute to CPP, report it as self-employment income. But you will have to pay double rate unless you can convince CRA to go after the employer for it. But that may be a can of worms you don't want to open.
    Oh definitely. Labelling me as an "independent contractor" makes sense for them, budget-wise, but it's not so great for the employee.

    I mentioned that my other income in 2016 was ~$5000 from a part time job while in school, but that was properly taxed and not a large amount anyway.

    Am I able to only report the $17,436 on Line 104 (with a note) and avoid reporting it as self-employment all together? I'm okay with not paying into CPP, but I don't want to get a major audit surprise later in the year because not paying into CPP isn't optional.

    Thanks for your insight!

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    Actually, from an employee point of view, it's not much different. Had you been an employee, they would have withheld your taxes and your portion of CPP, EI, etc. Your 17k would have turned into somewhere around 10k take home. You'd have given the government an interest free loan, and then have to prove to them that they took too much from you and they need to give it back.

    People always get excited about a tax refund, but they don't understand that the only reason they get one is because they paid too much in the first place.

    Personally, if prefer to get the 17k and then give the government it's portion in April, leaving me to use the money until then.
    I'm not JustAGuy (without spaces), or Donald, or <insert name here>.

  8. #7
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    The CRA has rules that determine the status of employee or independent contractor.

    It is an important difference because there are a lot of different considerations and responsibilities.

    Unemployment eligibility, Workers Compensation requirements, vacation pay, severance pay, business tax deductions........

    As outlined by the OP it is definately an employer/employee relationship.

    I would discuss the situation with the CRA before filing the tax return.

    At the start of a business relationship a worker and payer often think it is a very good idea to set up their relationship as an independent contractor entering into a contract with the paying business. This permits the paying business the advantage of not having to make source deductions of Employment Insurance “EI”, CPP, and income taxes nor pay health tax and workplace safety insurance premiums. The worker benefits in that he/she can deduct all reasonable business expenses from income. Sounds good but is it?

    Why Does It Matter?

    There are a couple of reasons:

    The Canada Revenue Agency (“CRA”) may audit the paying business and determine that the relationship is not one involving an independent contractor but rather is in reality an employer/employee relationship. The CRA will then demand that the employer remit past unremitted EI and CPP and charge penalties and interest. The corporate employer’s directors may be held personally liable. The employee may be required to review past income tax returns to limit past business expenses claimed.

    On a breakdown of the relationship, if the independent contractor can establish that he/she is in reality an employee, he/she may be entitled to termination pay under the Employment Standards Act (“ESA”) or under common law.
    Last edited by sags; 2017-02-18 at 12:08 AM.
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    Just A Guy may have overestimated the withholding amount. It would be more like $3,000 on $17,000 over the 8-month period I think. Otherwise, I agree that some people don't really understand that the refund is just their own money being returned. Others like the forced savings aspect and would not have invested the excess wisely.

    Sorry - this is off topic.

  10. #9
    Senior Member sags's Avatar
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    My son is facing the same problem as he was hired as an "independent contractor" last October.

    It has become clear that he isn't an independent contractor but an employee.

    The situation becomes a stalemate and a big problem to file a tax return.

    He will have to report as an employee, which will cause CRA problems for his employer........or participate in the fraud.

    It would be helpful if the CRA audited everyone who claims the costs of an independent contractor as a business expense.

    That may put a stop to this growing practice by employers.
    Last edited by sags; 2017-02-18 at 10:59 AM.
    Someone planted a tree a long time ago so I can sit in the shade.

  11. #10
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    It may also put an end to the jobs they offer people.

    I've also read about companies that CRA has shut down because of this...destroying jobs for the entire staff.

    It's a double edged sword.

    I'm not JustAGuy (without spaces), or Donald, or <insert name here>.

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