In the “All About You” feature, you learned who is responsible for remitting income tax, CPP, and EI to the Canada Revenue Agency (CRA) if you are an employee or self-employed. You also learned that the CRA has strict guidelines as to whether someone is self-employed or an employee. Assume that as a new graduate you are accepting a position where you will be providing consulting services to a company. You have agreed to provide the services for $3,000 a month. The company’s manager of human resources suggests that you may want to be considered self-employed rather than an employee of the company. Before you make your decision, you need to better understand the CRA’s guidelines and the financial implications. 

Instructions 

a. Go to the Canada Revenue Agency’s website at https://www. canada.ca/en/revenue-agency/services/forms-publications/ publications/rc4110.html and search for document RC4110 “Employee or Self-employed?” What are the factors that should be considered when determining if a worker is an employee or self-employed? 

b. Assume you are an employee and you are paid monthly and that the following amounts are deducted from your gross earnings.  

CPP ............................................    $159.74 

EI  ....................................................   47.40 

Income tax  ....................................574.70 

What is the amount of cash you will receive each month? What is the total amount of cash you will receive in a year?

c. Based on the information in part (b), what is the total CPP you will pay in a year? What is the total EI you will pay in a year? 

d. Assume you are self-employed, and you have chosen to pay EI. What is the amount of cash you will receive each month from the company? What is the total CPP you will have to pay in a year? What is the total EI you will have to pay in a year? 

e. Assuming that you have chosen to not pay EI and that you will pay the same amount of income tax as you would if you were an employee, calculate the amount of cash you will receive for the year if you are self-employed. 

f. Based on your answers to parts (c) and (e), do you want to be self-employed or an employee of the company? Explain. 

g. If you had the opportunity to provide consulting services to another company in your spare time, would your answer in part (f) be different? Explain.