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Incorporated vs T4

Discussion in 'Canadian Finance and Taxation' started by Mohit2889, Dec 22, 2017.

  1. Hi Everyone
    I am a PR and will be relocating to Toronto in Feb'18. While applying for Contract Job opportunities.
    I often get questions regarding Incorporated vs T4. Could anyone here help me understand the two. what are the merits and demerits. How to go about doing this?

    Thanks in Advance
  2. Hi,

    Situation 1)
    you are working as T4,
    means you are full time employee of your company (Employer),
    your employer will pay your CPP (Pension plan), EI (employment insurance) and TAX also some other employee benefits like insurance
    you will get net salary only.
    This is the most common and standard option.

    Situation 2)
    Incorporated means,
    You need to find an accountant, you need to pay the accountant as well
    register an incorporation
    And your incorporation goes in contract with the Company.
    You wont get any benefits from the company, no insurance etc.
    and most probably your contract would be of short time (like 6 months or 1 year)
    you need to file TAX for incorporation and as well as your self.
    Incorporated means you will file your T4 Tax yourself.

    2nd options is difficult to understand for new comers.
    But since you are new to Canada and you might be desperate to find a job, tell your recruiter that you are open for either of the two options.

    Wish you good luck with JOB HUNT
    Mohit2889 and APPNOV2014NY like this.
  3. Hi Everyone,
    Can anybody please help me here since this incorporation seems to be very confusing to me.

    1. Its been two months since I have moved to Canada and was looking for a job and after trying a lot and putting my all the efforts I finally got an incorporated job where I have to inc my self. I accepted this offer without knowing what all this incorporation about just because I am getting a chance to work with a very big brand.
    2. After discussing the same thing with CA i got to know that the taxes which I need to pay in inc will be almost 33% of my salary. Is it, if yes than is there any other way to save these taxes?
    3. Along with my salary I am going to get HST as well, so do we have to give this HST directly to government or can we use it as for our personal use?
    4. Is there will be any consequences if I am working as incorporated by my self now and If in future I want to switch to some permanent role? Can I do it without any problem?

    Can you guys please help me here since I am really not getting all these questions answer in a clear way.

  4. If you Incorporated, the HST you received, is being held in trust by you, and must be remitted to the government. When you incorporated, your company would have automatically received a BN, a nine digit number followed by RC0001. You then have to call the CRA and get a RT aka HST/GST account, which is how you remit the HST funds to the government. Even if you have not registered for a RT account, the HST you received must be remitted to the government . The RC0001 account is the program account you would use to file your T2, which is your incorporation income tax return. Sounds like the company did not hire you as an employee, but as a sub contractor. If this is the case, then you would have to register for a RP0001 account as well, which would be a payroll account, which is where you would remit your CPP/Fed/Prov taxes. You would not be eligible for EI if you own the company. Call the CRA Business line 1-800-959-5525. Have your article of incorporation available for the agent, your SIN, so the agent can go thru security, and review your corporation to see exactly what you require. One thing you do not want to do is ignore registering for the required program accounts, since this can cause problems down the road. Your CA who you discussed this with should have been able to give you guidance regarding some aspects of your responsibilities
    APPNOV2014NY likes this.
  5. Had you not looked at the taxation rates by income in Canada? We have a lot of services because our taxes are high/=.
  6. Well I was told that tax for self-employed persons (like you -- contract work - incorporated etc) is 15% as against 30% and thats the main advantage of contract work.

    higher pay -- less stability.
  7. You only get a lower tax rate if you keep all the money in your business and pay yourself very little. Contract workers is something different. Contract workers sometimes get better pay because they don't get extended health benefits, etc. so the company saves money. Hopefully the. employer passes on the savings to the employer.

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