IT professionals and independent contractors have incorporated their company to benefit from one of the many tax advantages. The CRA is not always so happy when they find out that contractors working for a firm have created their own corporation to provide the same services. If your IT consulting company is considered a PSB by CRA, you will face hundreds of thousands of dollars in back taxes. Additionally, all companies considered to be a PSB by CRA will no longer benefit from the tax advantages of incorporating.
CA4IT deals exclusively with IT professionals in ensuring that their tax rights are respected.
As an independent contractor, you need to take the necessary steps to reducing the risk of being considered a PSB by CRA. As a personal service business, the CRA will reassess your past tax files to collect all the taxes you supposedly owe. The rules levied on incorporations categorized as PSB by CRA are extremely punitive. At CA4IT, we offer our clients professional and expert representation if the CRA were to come after you for a PSB case. Fortunately, there are several things you can do to avoid being labelled as a PSB by CRA.
As an independent contractor or consultant, you want to be separate from the company you work for. Setting standards on how you conduct work, having employees and having more than one client who supplements your income are some of the things that would distinguish your company from a personal service business. To avoid getting characterized as a PSB by CRA, you want to have a separate identity for your company. Ensure that you have business cards without the name or phone number of your client. Try not to be listed on the company directory, which would make you seem more like an employee.
Mentioned above are a few of the questions the CRA would want answers to, in order to see if they should consider your incorporation as a personal service business. Reduce the risk of being labelled a PSB by the CRA and take the right steps today. CA4IT has nearly three decades of experience in helping IT professionals and consultants just like you, with very similar cases. The Canada Revenue Agency has lost many of the PSB cases it has gone up against. Just because you are considered a PSB by CRA, it does not mean CA4IT will not win that case for you. Get in touch with us today to stay protected!