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How much should we put aside for tax?

How much should we put aside for tax?

Old Aug 31st 2015, 9:38 pm
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Default How much should we put aside for tax?

So I'm not quite sure how to work this new job my other half has got.
He's been trying to get into Construction for awhile but had no experience. Finally he has landed a job as a labour/Carpenters helper. He's learning lots but it's just working for a guy.
This guy/employer says he is a subcontractor and responsible for his own tax etc.
That's crap in my option as he is most defiantly an employee and just a way to avoid paying WCB etc. Whatever though, right now we need the money and in 6 months he should have experience to try for an apprenticeship with another employer.

My question, how do we pay tax? CCP? EI? Do we just put money aside and pay after filing taxes at the end of the year? How much should we put aside for BC? My boyfriend is getting paid by personal cheque, its not cash in hand.

Thanks
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Old Aug 31st 2015, 10:11 pm
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Default Re: How much should we put aside for tax?

Originally Posted by tee1 View Post
So I'm not quite sure how to work this new job my other half has got.
He's been trying to get into Construction for awhile but had no experience. Finally he has landed a job as a labour/Carpenters helper. He's learning lots but it's just working for a guy.
This guy/employer says he is a subcontractor and responsible for his own tax etc.
That's crap in my option as he is most defiantly an employee and just a way to avoid paying WCB etc. Whatever though, right now we need the money and in 6 months he should have experience to try for an apprenticeship with another employer.

My question, how do we pay tax? CCP? EI? Do we just put money aside and pay after filing taxes at the end of the year? How much should we put aside for BC? My boyfriend is getting paid by personal cheque, its not cash in hand.

Thanks
Yes put money aside and pay when you file your taxes. If i were you, i'd see an accountant to help in Feb 2016 or so to make sure everything is covered. $250 or so for initial peace of mind could be worth it.

Put aside 40% if possible to cover yourselves and you'll likely have a good chunk left after all taxes are paid.
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Old Sep 1st 2015, 1:30 am
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Default Re: How much should we put aside for tax?

Originally Posted by tee1 View Post
So I'm not quite sure how to work this new job my other half has got.
He's been trying to get into Construction for awhile but had no experience. Finally he has landed a job as a labour/Carpenters helper. He's learning lots but it's just working for a guy.
This guy/employer says he is a subcontractor and responsible for his own tax etc.
That's crap in my option as he is most defiantly an employee and just a way to avoid paying WCB etc. Whatever though, right now we need the money and in 6 months he should have experience to try for an apprenticeship with another employer.

My question, how do we pay tax? CCP? EI? Do we just put money aside and pay after filing taxes at the end of the year? How much should we put aside for BC? My boyfriend is getting paid by personal cheque, its not cash in hand.

Thanks
This might help https://simpletax.ca/calculator

Look at this, CRA are very hot about contractors in construction and self employed. RC4110 - Employee or Self-employed? As many are really employees.

Mostly doing this means employers don't have to pay the employer contribution for CPP and EI. Unless he does his own WCB, the employer should be reporting contractors on their WCB filing.

Your partner is PR, Canadian or on TWP?
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Old Sep 1st 2015, 2:42 am
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Default Re: How much should we put aside for tax?

Originally Posted by Aviator View Post
This might help https://simpletax.ca/calculator

Look at this, CRA are very hot about contractors in construction and self employed. RC4110 - Employee or Self-employed? As many are really employees.

Mostly doing this means employers don't have to pay the employer contribution for CPP and EI. Unless he does his own WCB, the employer should be reporting contractors on their WCB filing.

Your partner is PR, Canadian or on TWP?
Thankyou, He's a PR

Yes that's what I was thinking. His boss is wanting to avoid paying contributions. There is no way he meets the definition of contractor, he is an employee for sure, he's got zero experience for 1.

My partner is not paying his own WCB, nor should he as he is paid the wage of an employee and we couldn't afford it anyway . I am bit concerned in-case he get hurt at work with this.

I just want to make sure we do everything above board and are not penalized in anyway for his employers decision to call him a contractor.
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Old Sep 1st 2015, 3:11 am
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Default Re: How much should we put aside for tax?

Originally Posted by tee1 View Post
Thankyou, He's a PR

Yes that's what I was thinking. His boss is wanting to avoid paying contributions. There is no way he meets the definition of contractor, he is an employee for sure, he's got zero experience for 1.

My partner is not paying his own WCB, nor should he as he is paid the wage of an employee and we couldn't afford it anyway . I am bit concerned in-case he get hurt at work with this.

I just want to make sure we do everything above board and are not penalized in anyway for his employers decision to call him a contractor.
When an employer files their WCB report, there is a section for employees and another to report payments to contractors who don't have their own WCB, they should report both.

Homeowners and employers could be on the hook if there is an injury and the contractor has no WCB of their own. However if a company closes it can be hard to pursue. For contractors we always get a clearance letter from WCB website or if the contractor has no WCB they go on ours. Unless we really need them, we don't hire contractors without WCB of their own.

Many homeowners are unaware of their liability and should be getting clearance letters or filing WCB for any contractor on their property who does not have their own WCB. Their homeowners insurance pay not cover them in some circumstances.

He could talk to the employer about WCB, the employer may tell him to get his own though, or not hire him at all.

There is the option of going to WCB and CRA yourselves to clarify the issue. Talking to an accountant may help with the CRA issue. If CRA find out, even after the fact that he was really an employee, they still may go after the employer for contributions if someone reported the employer to CRA.
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Old Sep 2nd 2015, 12:47 am
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Default Re: How much should we put aside for tax?

Originally Posted by tee1 View Post
My question, how do we pay tax? CCP? EI? Do we just put money aside and pay after filing taxes at the end of the year? How much should we put aside for BC? My boyfriend is getting paid by personal cheque, its not cash in hand.
If he's self-employed, he completes T1 schedule T2125 every year and needs to get a business number from the CRA (self-employed person) and invoice the employer. In the process of so doing, the CRA may well look at the situation and say he isn't a subcontractor and needs to go on the employer's payroll, but I wouldn't hold my breath...

Self-employed people pay their tax by installments every quarter after they've filed their first T2125. The payments are calculated based on the assessed amount for the previous tax year.

He'll need to invoice for his work and collect GST and possibly PST.

Self-employed people have to pay both halves of CPP, i.e. the employee and employer half. Self-employed people are exempt from EI.

I would say rule-of-thumb, keep back a third of the invoiced amount to cover taxes.

Very strongly recommend having a read through: Small businesses and self-employed
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Old Sep 2nd 2015, 12:50 am
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Default Re: How much should we put aside for tax?

Originally Posted by tee1 View Post
There is no way he meets the definition of contractor, he is an employee for sure, he's got zero experience for 1.
http://www.cra-arc.gc.ca/E/pub/tg/rc4110/rc4110-14e.pdf

The CRA is supposed to enforce those rules. Imx all they seem to care about is GST/HST collection though. Make absolutely sure he collects it and does the GST return.
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Old Sep 2nd 2015, 12:51 am
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Default Re: How much should we put aside for tax?

No PST on labour only services. I agree 1/3 is quite sufficient. Tee1's OH should definitely clarify who is paying WCB.
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Old Sep 2nd 2015, 1:09 am
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Default Re: How much should we put aside for tax?

Originally Posted by Aviator View Post
Many homeowners are unaware of their liability and should be getting clearance letters or filing WCB for any contractor on their property who does not have their own WCB. Their homeowners insurance pay not cover them in some circumstances.
I have this argument every year over snow clearance. Every frigging year. Is this your property, is that your property, what insurance coverage do you have, blah blah flipping blah.
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Old Sep 2nd 2015, 12:25 pm
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Default Re: How much should we put aside for tax?

Make note to never be a contractor, all this sounds downright confusing.
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Old Sep 2nd 2015, 2:24 pm
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Default Re: How much should we put aside for tax?

Originally Posted by Jsmth321 View Post
Make note to never be a contractor, all this sounds downright confusing.
Unless you do contract killing, then you can just 'take care' of the confusion.
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Old Sep 3rd 2015, 8:47 am
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Default Re: How much should we put aside for tax?

Originally Posted by BristolUK View Post
Unless you do contract killing, then you can just 'take care' of the confusion.
I'll stick with slightly more legal work....
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Old Sep 4th 2015, 12:13 am
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Default Re: How much should we put aside for tax?

I just noticed on T2 that line 295 asks the question:

If the corporation's major business activity is construction, did you have any subcontractors during the tax year?
If you check "yes" to that question, methinks you go up in the "likely to be audited" ranks PDQ.

So my advice would be for the OP's OH to point this out to his employer, because I'm fairly certain his accountant will point out what I've just pointed out.
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Old Sep 4th 2015, 1:41 am
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Default Re: How much should we put aside for tax?

Originally Posted by Steve_ View Post
I just noticed on T2 that line 295 asks the question:



If you check "yes" to that question, methinks you go up in the "likely to be audited" ranks PDQ.

So my advice would be for the OP's OH to point this out to his employer, because I'm fairly certain his accountant will point out what I've just pointed out.
It is 2 years old, but still pertinent. 2 & 10 are worth noting
https://www.gowlings.com/KnowledgeCe...asp?pubID=3095

http://www.hrsbs.ca/employee-vs-cont...lassification/
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