Employment - Tran Chung Income or Loss From and Office or Employment INTRODUCTION Subdivision a of Division B defines employment income under the

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Tran Chung Income or Loss From and Office or Employment INTRODUCTION Subdivision a of Division B defines employment income under the Act. Section 5 – salary, wages and gratuities received Section 6 – other income inclusions arising from employment Section 7 – stock option benefits Section 8 – deduction allowed against employment income © 2010 Tran Chung 1
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BASIC RULES Employed vs. Self-employed/Independent Contractor The issue of whether an individual is an employee or independent contractor is a question of law. Key tax differences: Employee Self-Employed Limited in the deduction of expenses Can deduct reasonable expenses incurred to earn the income Must contribute to EI Does not contribute to EI Must contribute to CPP Must contribute both the employee’s and employer’s portion Some other considerations: Job security Benefits WCB Insurance Expenses © 2010 Tran Chung 2
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Making the Distinction The following interrelated tests have evolved in the courts: a. Economic reality or entrepreneur test ( Montreal v. Montreal Locomotive Works) ; 1) Control – 2) Ownership of tools – 3) Degree of Financial risk – b. Integration or organization test ; How integrated is the individual vis-à-vis the business? c. Specific result tests . Is the individual paid by the job or by the hour? © 2010 Tran Chung 3
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Class Problem on Employee vs. Contractor The Door Depot Inc. is carrying on the business of installing and repairing doors. In carrying on its business, it engaged the services of a considerable number of door installers and repairers on the understanding that they would be running their own businesses and would be responsible for their own taxes and for workers' compensation, unemployment insurance, and CPP contributions. The worker was free to accept or refuse any particular job The Door Depot asked him to do, and the worker was not required to work or attend at the taxpayer’s place of business. The worker had to guarantee his work for a period of time and bear the cost for warranty work. The workers provided their own trucks and tools except special drills and racks owned by the The Door Depot. The workers were paid by the job and not by the hour. Required: Are the door installers an employee or independent contractor of The Door Depot? © 2010 Tran Chung 4
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Salaries, Wages and Other Remuneration including Gratuities “Salaries” and “wages” are terms commonly used, however, “remuneration” has a broader meaning. Remuneration includes bonuses, honoraria, commissions, tips paid to employees. The use of the word “received” in section 5 means that the employee must report employment income on a cash basis, not on an accrual basis. SPECIFIC INCLUSIONS
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This note was uploaded on 11/03/2010 for the course COMM 355 taught by Professor Trancheung during the Winter '10 term at The University of British Columbia.

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Employment - Tran Chung Income or Loss From and Office or Employment INTRODUCTION Subdivision a of Division B defines employment income under the

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