Hi CDs,

I have the opportunity to switch from my current permanent job to contract work for another company.

I have never done contract work (not at least in Canada) and have some questions/fears around that.

I am in the IT field (programming).

Can any CD who is either an IT contractor or has been one recently share some insights, do's, don't's, gotachas, etc.

In particular, I am looking for the following -

1. Tax implications (is there any deduction at source, how do I file, should I register my own company, etc.)

2. How to make sure the recruiter/middleman does not take advantage of me, or take big cuts out of my rate

3. What's the protection against getting paid, on time.

4. What does it do to my credit history, car insurance rates, mortgage/loan rates, etc.

I hope I am not asking stupid questions, and someone can help me out here.

Regards.

I was doing contracting. Initially my contracting was thru a recruiter and he was earning $13 per hour from me. Though I was a contractor he was doing some deduction (as per law he was suppose to do so)

After my contract ended with him, I started direct contracting with the company. I incorporated and it was easy to manage things that way.

Overall it helps to save money, as you can show business expenses. The credit history does not get affected for sure.

Only thing when you apply for a new job, you are not going to mention that you worked for your own company. You will be reporting your client as where you worked for. Now without asking you if they do some background check, the report would be different. So you will have to take care of it.

I also have to pay advance taxes, GST etc. so there is some admin work burden. I also have to pay good amount of money to the accountant for filing the taxes and writing books of accounts.

As a contractor you will not get the benefit of EI. But hey, when you are earning handsome amount of money, who cares about $1800 per month for 6 months only? Any way you are going to save more than that in few years. (Also if you are earning more, you will have to payback the EI, once you again start earning, so there is no real benefit of EI for high income people. Correct me if I am wrong)

-----------------------------------------------------------------
A Proud Indian Canadian

GG,
In this case of contarct work, Does one have to pay CPP and in what ratio. I heard that it will be your contribution and your employer's (in this case, It will be again you) contibution. So will we be paying 2 times of CPP's contribution?
Also you have not mentioned if we have to pay the contribution to EI based on our salary.
Please do clarify the above 2 points !
TK A

-----------------------------------------------------------------
I am a Gents and not a Ladies.

In your own corporation - you are an employee. EI is not applicable to you (or your immediate relatives working for your company) so you don't have to do anything for it. My accountant told me that this is ambiguous and some people ask for the EI deduction, but ultimately it is not required. Even if you fire yourself (and deducting EI) you can't get the EI.

For me I never deducted any EI or CPP for me.

-----------------------------------------------------------------
A Proud Indian Canadian

Thanks GG for the information.
I am on contract and am thinking of registering as an Incorporation.
This is good news to me as i will be allowed to pay only income taxes on the salary got (after deducting Business expenses).
This will be of immense help / use to desi's like me who donot belive in getting EI or CPP but want to be responsible Canadian citizens by paying taxes. OTOH, do i have to register myself as an incorporation to avail these benefits or do i just consider myself as self-employed ?
I think for a simple case like mine, an accountant would charge $300 to $500 to file my taxes. Could you please give me the address of your accountant (by PM) , incase he/she lives in the west end or in Mississauga?
TK A

-----------------------------------------------------------------
I am a Gents and not a Ladies.

Quote:

---

Originally posted by tamilkuravan

do i have to register myself as an incorporation to avail these benefits or do i just consider myself as self-employed ?TK A

---

-----------------------------------------------------------------
Mumbai Maazi Ladki ...

It is better to have a corporation if you are earning more. The simple reason is that the corporate income tax is lower than individual income tax.

I am waiting for Chandresh to jump on this thread. He is a competent accountant

-----------------------------------------------------------------
A Proud Indian Canadian