CRA labelling your SMB as a PSB

if they snoop around yes likely they label you a PSB; chances of being checked for audit, hard to say

in my entire career (approx 10 years) I have never heard of corporate tax being audited: HST and payroll yes, never corp tax

newinc wrote: ↑

Apr 16th, 2017 7:55 pm

Has anyone had experience with this?

I am a one-person incorporated SMB that is doing contract work through a talent agency.

How likely am I going to be labelled a PSB? All the articles I see are for "IT contractors", does that term include designers?

Do you do work for multiple people. You say through an agency. But does this mean you have multiple people/companies that you do work for? Do you set your own hours, have a choice of what work you accept, etc?

Momof3cuties wrote: ↑

Apr 17th, 2017 7:20 pm

Do you do work for multiple people. You say through an agency. But does this mean you have multiple people/companies that you do work for? Do you set your own hours, have a choice of what work you accept, etc?

I currently only do work for one agency.

I set my own hours as in I don't need to work 9-5, but I am expected to keep a timesheet of the hours worked. If I need a day off, I assume I just don't bill for it and let both parties know.

As far as having a choice of what work I accept, I don't. But, in what situation would you ever be able to sign a contract to work for X amount of time and then refuse to do the work and expect to get paid?

newinc wrote: ↑

Apr 17th, 2017 8:11 pm

I currently only do work for one agency.

I set my own hours as in I don't need to work 9-5, but I am expected to keep a timesheet of the hours worked. If I need a day off, I assume I just don't bill for it and let both parties know.

As far as having a choice of what work I accept, I don't. But, in what situation would you ever be able to sign a contract to work for X amount of time and then refuse to do the work and expect to get paid?

You are a PSB.

CRA is actively sending out questionnaires to companies that are flagged up as potential PSBs. I received one myself.

If I were you, I would start doing some work for other clients. It doesn't need to be much at all.. At least then you'll have more than one client and you might pass an audit.

van800 wrote: ↑

Apr 17th, 2017 11:38 pm

CRA is actively sending out questionnaires to companies that are flagged up as potential PSBs. I received one myself.

If I were you, I would start doing some work for other clients. It doesn't need to be much at all.. At least then you'll have more than one client and you might pass an audit.

Thanks for the heads up!

As soon as I found out about the PSBs I started looking for more contract work.

Can you share what the questionnaires ask?

For better or worse, your situation has plenty of indicators it is exactly what the PSB rules are *designed* to catch. It feels like you are for all intents and purposes a (slightly flexible) employee of your talent agency.

What's your risk of being audited I don't know. You may know this already, but the downside is that you'll get retroactively taxed at what amounts to worse than top marginal rate on all your income, and most of your expense deductions will be disallowed. Not pretty.

I don't know your field specifically, but I get quite annoyed by the number of temp staffing agencies of all sorts of creative, technical, and business talent that force or encourage their "talent" to incorporate with a siren song of tax benefits, knowing fully well these people are sailing very close to the wind in terms of being classified as PSBs. But gives the agencies plausible deniability and shifts the consequences of an eventual "employee not a contractor" finding onto the poor schmuck rather than the agency. There are genuine ways how such agencies and their contractors could change their business model to significantly reduce the PSB risk, but those would also increase the contractor's power in the relationship (as well as, to be fair, decrease the stability in their income -- part of the entrepreneur/wage-droid tradeoff...) and so somehow those are always off the table. [rant off!]

There's a fair number of good links in other threads on RFD about CCPCs and PSBs. In addition, a few days ago someone on reddit (can't find right now who to give proper credit) posted a link to an informative series of blog posts by Moodys-Gartner. You can start reading backwards here, including the footnotes.

van800 wrote: ↑

Apr 17th, 2017 11:38 pm

CRA is actively sending out questionnaires to companies that are flagged up as potential PSBs. I received one myself.

Did it look like this one? Looks like a useful resource to be aware of as well as the CRA information circular RC4110 on employee-vs-contractor.

houska wrote: ↑

Apr 18th, 2017 8:26 am

Did it look like this one? Looks like a useful resource to be aware of as well as the CRA information circular RC4110 on employee-vs-contractor.

Yeah it was something like that.

Get some new clients as soon as you can. Even if it's just cutting lawns for people or some other kind of freelancing. You need something to show that you have more than one client.

CRA picked us out because we have high revenues and low costs. THat's a typical marker of someone who's really a PSB (although not in our case).

houska wrote: ↑

Apr 18th, 2017 8:14 am

For better or worse, your situation has plenty of indicators it is exactly what the PSB rules are *designed* to catch. It feels like you are for all intents and purposes a (slightly flexible) employee of your talent agency.

In my case, Company X (my company) is paid by Company Y (talent agency) but I work for Company Z (the company I actually do the work for).

After reading this from the CRA (http://www.cra-arc.gc.ca/tx/hm/xplnd/itc-eng.html), I don't see how I am a PSB based on their own definition. My "Payer" is the talent agency, not the company I do the work for. Could the CRA just be targeting companies who do not have the agencies that serve as middlemen?