CRA penalty for being classified as an employee vs. contractor
I've spoken to an accountant (highly recommended by trusted friends), who says I can file taxes as a sole proprietor and declare the money as self-employed income. There's no funny business on my end -- I'll be paying the full personal income tax rate, plus my own and the employer portion of CPP contributions. He also said we could do some modest writeoffs, including a portion of my mortgage and internet bill. Thing is, I've read a lot online about the CRA going after contractors and/or employees in similar situations. The difference is that the employer is a Canadian company. Usually they go after the "employee" because he/she has incorporated (but in all other senses is an employee), and is only paying the much lower small business tax rate. Or they target the employer for skipping on required payroll deductions.
What I'm curious about is what exactly would happen if I were to get reviewed or audited. I assume the CRA would have difficulty pressing a Japanese company for unpaid taxes. In fact I doubt they would bother. So I'm curious what I'd be on the hook for. Could I be dinged with penalties that would otherwise be slapped on my employer?
Thanks in advance for any insight on this.