Dear Working Wise: I just started a new job as an oilfield production tester. My friend, and new co-worker, helped me get the job.
He says that because we’re contractors we can write off all sorts of expenses. Can you tell me what I’m allowed to write off on my tax return? — Curious Contractor
Dear Curious Contractor: Congratulations on your new job. Taxes are a federal issue, though, so I really can’t provide any advice on which expenses you are entitled to deduct.
I recommend you visit the Canada Revenue Agency website at www.cra-arc.gc.ca and check out the pages under New Businesses and Income Tax. The site includes some information that explains what a business expense is and provides examples of expenses.
You can also check out the Business Link website (www.canadabusiness.ca/alberta), which contains a lot of easy-to-read information for current and new business owners. And, as always, accountants are also excellent sources of tax advice, services and information.
However, your description of your new job makes me wonder if you are truly a contractor and not simply a contracted employee. The difference may seem small, but it is actually quite significant and involves everything from being able to write off business expenses to how accountable you are if things go wrong at work.
Employees are covered by the protections in employment standards legislation, such as overtime pay, vacations and termination pay. Someone who is truly an independent contractor is not be entitled to these protections.
Independent contractors also have responsibilities, particularly if you are an employer of other individuals, when it comes to employment standards, occupational health and safety, and worker’s compensation.
Governments use different considerations to determine if a worker is an independent contractor or contracted employee.
In general, independent contractors tend to:
• Have control over when and how the work is done;
• May employ or subcontract others to do the work;
• Have more than one client/employer;
• Supply the equipment, furniture and tools required to do the job;
• Carry the risk of profit or loss from the job;
• Submit invoices and receive pay as a lump sum or through installments;
• Not participate in the Employment Insurance program;
• Have the required training before starting the job or pay his/her own training costs;
• Work without supervision to meet the terms of the contract.
These, of course, are general guidelines, but they should give you a better idea if you are truly an independent contractor.
Regardless, I recommend you read Employee or Contractor: Know the difference. It’s available online by searching the Alberta Learning Information Service website ( www.alis.alberta.ca) and includes contact information for the various applicable government departments.
You might also be interested in reading Self-Employment: Is it for me?, which lists some of the pros and cons of starting your own business.
Good luck in your new venture!
Working Wise is compiled by Charles Strachey of Alberta Employment and Immigration (charles.strachey@gov.ab.ca) for general information.