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income tax question in canada?
Please help me with my questions.
I live in Vancouver, BC, Canada and work as a tutor at a learning center. I don’t know why the employer categorizes all of her employees as self-employed. So, all of us are self-employed tutors for her and get pay by the hour. That means,
there are no deductions from our paycheques ( no contributions to Canadian Pension Plan and to Employment Insurance). We all get the gross earnings.
(1) I am single, have no children, and don’t have any assets,
investments, bonds, cars and so on. I have always been
living in Vancouver, BC, Cananda. I rent an apartment and
go to work by bus. Approximately, I will have earned an
annual gross income of $14 000 CAD at the end of 2008.
How much do you think I will have to pay back the
government when I file an income tax return next year?
(2) Why does my employer employ us on a self-employed
basis? Is she getting any advantages this way?
Thanks a lot.
When you say ‘I rent an apartment’ I’m going to assume that you are the tenant, not the landlord, which seems to have been the assumption for the first answer.
First off, it’s not unusual that tutors would be classed this way. I know someone in the same boat, even though he works through an agency (similar to Sylvain). Keep your receipts for any and all expense you have that relate to your tutoring, such as stationary, and such. If you don’t have a car, and don’t have to go from place to place to tutor different students, I can’t think of what else you would be able to claim.
If you are taking the bus to work, start using monthly passes and keep them. They are now claimable on Schedule 1 as a non-refundable credit. In order for the pass to be a valid deduction, it must show your name, the amount paid, and must have been for unlimited use during the month.
If your gross income is around $14,000, you will be subject to Federal and British Columbia income taxes. The estimated amounts are as follows:
Federal: 15% above $9600 ($660)
BC: 5.35% above $9189 ($257.40)
So the income tax won’t amount to all that much. The big juicy bite will be the Canada Pension Premiums, and this is one of the advantages that your employer has in not “employing” you.
When you are regularly employed, an employer is required to match your contributions to the CPP. The normal rate is 4.95% of the income above $3,500.
When you are self-employed, you are required to pay the normal rate for employees, and also match the contribution because you are your own employer. So you will be paying 9.9% of the income above $3,500.
CPP: (14,000 -3,500) * 4.95% = $1039.50
So on your $14,000 income your approximate liability for income tax and CPP will be about $1,958.
One more thing to be wary of. As a self employed person, you are not allowed to pay EI premiums. So if you lose the job for whatever reason, you will not qualify for EI benefits.
Filed under auto insurance price quote by on Jun 26th, 2010. 
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