Author Topic: How to explain being a contractor to another contractor  (Read 928 times)

ElleFiji

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How to explain being a contractor to another contractor
« on: March 19, 2018, 08:44:44 AM »
Hey!

I work in healthcare, and I'm an independent contractor, and so is a colleague (most of them are). She was talking about getting a tax refund, and I asked her about how that works, if she pays in installments etc... and she said no. Then I asked if she is incorporated. She said no. I asked if she pays CPP. She said no. I asked if her family or an accountant handle all her accounting... she said no, but she's 100% sure she's doing everything right.

2017 was her second year in practice, so if she really hasn't been paying taxes or CPP, she could still recover.

Before I bring this up with her again, can anyone come up with any possible situations where she isn't fucking herself over? How can CRA be issuing a refund if she isn't paying anything?

plainjane

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Re: How to explain being a contractor to another contractor
« Reply #1 on: March 19, 2018, 09:01:18 AM »
Could she be getting a GST refund or something from the province as a low income person? Or is she just expecting a refund, and hasn't done any paperwork yet?
Using procrastination to my advantage since 2001.

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ElleFiji

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Re: How to explain being a contractor to another contractor
« Reply #2 on: March 19, 2018, 09:13:18 AM »
Could she be getting a GST refund or something from the province as a low income person? Or is she just expecting a refund, and hasn't done any paperwork yet?
That's absolutely possible - she's around my income level with high SL debt. And I still enjoy my HST cheques.

Or possibly since 2016 was her first year in practice she worked elsewhere as an employee and payed taxes/got a refund and this year will be a cruel awakening?

okits

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Re: How to explain being a contractor to another contractor
« Reply #3 on: March 19, 2018, 01:43:03 PM »
Maybe she withdrew funds from an RRSP account for living expenses?  If she is low income the automatic withholding may have been too much and she will get some of it back.

Is it possible she has already paid tax on her earnings (or the place that pays her did it) even though she is supposed to be a contractor (or just thinks she is)?

Possibly a stretch, but if she was receiving any government benefits maybe she is getting the withheld tax back (in my case I am being refunded the tax from my EI parental leave benefits because they withheld too much for my actual income level).

ElleFiji

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Re: How to explain being a contractor to another contractor
« Reply #4 on: March 19, 2018, 07:43:01 PM »
Maybe she withdrew funds from an RRSP account for living expenses?  If she is low income the automatic withholding may have been too much and she will get some of it back.

Is it possible she has already paid tax on her earnings (or the place that pays her did it) even though she is supposed to be a contractor (or just thinks she is)?

Possibly a stretch, but if she was receiving any government benefits maybe she is getting the withheld tax back (in my case I am being refunded the tax from my EI parental leave benefits because they withheld too much for my actual income level).
1) I do not think so, she went straight from school to work
2) Not at the clinic we are both at, we are both contractors there for sure. There is a slight chance she is an employee elsewhere, but it is SUPER unusual in our jobs
3) I admire your dedication to this thought exercise. Possibly she has a secret dependent I am unaware of, and took some kind of EI leave. I might suggest that niceclinicowner has this discussion in a mentoring way.

Missy B

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Re: How to explain being a contractor to another contractor
« Reply #5 on: March 19, 2018, 08:38:54 PM »
Maybe she withdrew funds from an RRSP account for living expenses?  If she is low income the automatic withholding may have been too much and she will get some of it back.

Is it possible she has already paid tax on her earnings (or the place that pays her did it) even though she is supposed to be a contractor (or just thinks she is)?

Possibly a stretch, but if she was receiving any government benefits maybe she is getting the withheld tax back (in my case I am being refunded the tax from my EI parental leave benefits because they withheld too much for my actual income level).
1) I do not think so, she went straight from school to work
2) Not at the clinic we are both at, we are both contractors there for sure. There is a slight chance she is an employee elsewhere, but it is SUPER unusual in our jobs
3) I admire your dedication to this thought exercise. Possibly she has a secret dependent I am unaware of, and took some kind of EI leave. I might suggest that niceclinicowner has this discussion in a mentoring way.

Man, my eyes went round when I read your OP. No tax, maybe, but no CPP? Not unless her net income is less than $3500 a year.... or she's making $53000 as an employee elsewhere. Thing is, even if she just ignored the CPP schedule, Rev Can should have caught it and dinged her.

I remember trying to explain amortization to another contractor.
She: "I paid no taxes this year."
Me: "Oh? How did you manage that?"
She: "I had lots of write-offs. Like that $13,000 thing I bought."
Me: "You can't write off $13,000 thing all at once in the year you bought it. You have to spread it over years...blah blah different classes blah blah."
She: "I can so write it off! I'm a doctor."

They never caught her, and she's probably still doing it.

Prairie Gal

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Re: How to explain being a contractor to another contractor
« Reply #6 on: March 31, 2018, 09:26:06 AM »
If her income is ultra low she may be getting the Working Income Tax benefit. I have seen a few people that have paid no tax during the year get a "refund" because of it.  But even so, unless she is making less than $3500 per year, she should definitely be paying CPP (both sides). I would suggest that she get her return reviewed by someone. Even H&R Block would be better than nothing. 

ElleFiji

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Re: How to explain being a contractor to another contractor
« Reply #7 on: March 31, 2018, 05:25:07 PM »
Thanks again! She hasn't done her taxes for this year, but I warned her. ... She wasn't ready for a firm warning, but it sounds like it'll get caught.

Unless it doesn't because she's a doctor :)