Whether an individual is to be treated as a contractor or an employee for tax purposes is a common question. There are implications for both the payor and the recipient. If the individual is an employee, the employer is required to withhold taxes, Canada Pension Plan and Employment Insurance contributions. If the individual is in Ontario, there could also be employer health tax or workers' compensation payable. Implications for the recipient are whether he/she must make his/her own Canada Pension Plan contributions. For an individual contractor there are more allowable deductions available from taxable income than there are for an employee.
The factors to be considered in determining whether an individual is an employee or a contractor have been established by case law. According to the courts, the key factors in determining whether an individual is an employee or a contractor are:
The degree of control over work;
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