Ask an Expert
Do I pay back tax write-offs if the CRA determines I am an employee?
Expert: James Rhodes
If the labour board came and told me that I am an employee as opposed to an independent contract worker, am I expected to pay fees/money/taxes back to the Canada Revenue Agency (CRA) for the write-offs I had in the previous years? If so, how many years does it go back?
James Rhodes answered:
Each government agency can make its own determination of whether you are an employee or independent contractor. The Canada Revenue Agency (CRA) is not bound by a ruling made by the labour board or any other government agency. Technically, the CRA is not even bound by its ruling on previous years, meaning it can change its mind down the road.
However, usually the CRA will grant some respect to the decision made by another board or government agency that has looked into the situation. The CRA is only bound by a court ruling on the exact time frame being looked at - and technically they are only bound if the CRA (or Minister of National Revenue) was a party to that court action.
If the CRA does get notified of the labour board's finding, or for other reasons does look into your situation and feels that you are an employee, you are then given a chance to make representations to them as to why you are an independent contractor and not an employee.
If the CRA determines that you are, or were, an employee, then there will be an issue that you are not entitled to the business expenses you have claimed. However, you may be able to claim some or all of the expenses as an employee.
The CRA generally does not reassess past what is called the 'normal reassessment period' unless they believe that the taxpayer was negligent in filing his or her tax returns. Where a taxpayer is a person and not a corporation, the normal reassessment period refers to the three year time period starting from when a person gets their Notice of Assessment for a tax year (i.e. if you filed your 2003 tax return, and received a Notice of Assessment dated July 1, 2004, the normal reassessment period would roughly expire on July 1, 2007).
About the author
James Rhodes, LLB, BSc, is an associate with Miller Thomson LLP.
He can be contacted at: 519.593.2403, Fax: 519.743.2540 or Email: firstname.lastname@example.org.