THE EMPLOYEE VS. INDEPENDENT CONTRACTOR DEBATE

BACKGROUND

Approximately 16 years ago, CA4IT member, Wall & Associates, Chartered Accountants, began advising IT contractors that they may be able to take the position that they were independent contractors and that they could incorporate their business to realize significant tax advantages.

Today CA4IT member firms in Vancouver, Calgary, Edmonton, Winnipeg, Toronto, Ottawa and Montreal serve approximately 3,000 IT contractors and are recognized nationally as a leader in the employee vs. independent contractor issue. Sixteen years ago the possibility that an IT software developer could be an independent contractor was considered an aggressive tax strategy. The majority of professional accountants took the position that such individuals would be considered to have set up a “personal service corporation” and, consequently, would gain no tax advantages from incorporation, as they would be deemed to be employees.

THE WIEBE DOOR CASE

In 1986 the Wiebe Door Case decision set the precedent for the criteria to be used for deciding the employee vs. independent contractor debate. The Wiebe Door Case established the following criteria to be used:

1. The extent to which the employer controls how the work is done

2. The risk of profit or loss

3. The ownership of tools

4. The extent to which the work performed is an integral part of the process in the employer’s business

In 15 years of experience in representing IT software developers, the CA4IT member firm of Wall & Associates, Chartered Accountants has represented thousands of IT contractors regarding the independent contractor issue and has never lost a case to Canada Customs & Revenue Agency on this issue. The main considerations and arguments can be summarized as follows:

The primary measurement is the extent to which the employer controls what work is to be done and how the work is to be done. If, under the terms of a contract, the employer could say to the IT software developer, “Mary, we are extremely busy in the shipping department today. Go over there, report to Bill and help them out,” then it would be reasonable to infer that the individual would be an employee. In the case of IT software developers, they are hired to develop software based on their background and expertise and are not counseled as to how they should do their job.

The second criteria identified in the Wiebe Door Case was the potential for profit or loss. The courts have found IT software developers liable for damages as a result of negligence and, for this reason alone, there is a risk of profit and loss. Generally this risk can be underwritten through payment of a comprehensive general liability insurance premium of about $300.00/year.

The third criteria is the ownership of tools. The tools of the IT software developer are generally considered to be the education, background and experience of the individual coupled with personal computers and offices in their homes.

Testimonials
gimhana muthukumaranagimhana muthukumarana
I have known George and Andrew for number of years and they are professional with genuine passion to help, I have used CA4IT services for my personal and corporate tax filling. I am satisfied with the service.I would recommend talking to George or Andrew for your tax filling needs.
Jon SharkeyJon Sharkey
Very happy with CA4IT for my small tech business. They're friendly, knowledgeable, and make my accounting issues easy.
Dan EngDan Eng
My wife and I had the fortunate experience of working with George Wall, a principal of Wall and Associates. George treated us to breakfast in the early morning hours on a number of occasions to advise us on my wife's business. As a result, my wife saw the value of ...
These guys are worth every penny. You never know how much tax you are really supposed to pay until you meet real Pro's and watch them do their thing.I signed up with these guys to create my first ever corporation and they've held my hand through every step of ...
François OuelletteFrançois Ouellette
Not just an accounting firm!CA4IT / Wall and Associates is a team of highly skilled professionals who will review your financial statements in details and come up with sound advice on how to organize and present your yearly tax statements. I have been with them for almost 10 years and ...
Brad brownBrad brown
Wall and Associates handled my incorporation and all my ongoing corporate financial filing. They're focused on IT professionals, so they've given me great direction and advice on corporate structure, tax planning, tax minimization; everything I need to have someone else worry about! I've directed other IT pros to ...
Bhavroop ChauhanBhavroop Chauhan
I have been with CA4IT for over 6 years now, and highly recommend them to anyone looking for accounting services. I was referred to them by a colleague since I needed tax advise with a focus on IT, and I was very impressed with Andrew's ethical approach to his job. ...
Munib ButtMunib Butt
I have been working with Ca4IT for over 2 years now and I would like to say that they are the best. They provide excellent and very professional service. If you have any question, you can call or email them and you would get a response right away. They have ...
My Partner has been going to George for a few years.Lets just say he's more than happy. Now all I have to do is to start making some money so they can help me to 🙂
Frederick IpFrederick Ip
Wall and Associates have helped me navigate the set-up and reporting concerns for two years now, which allowed me to focus on my business. I've found their client website and virtual meetings to be extremely helpful, as I travel quite a bit and it is not possible to meet in ...