Contractors and employees report their income to the CRA using completely different forms and timelines. Employees receive a T4 slip from their employer by February 28th and report that amount on line 10100 of their tax return. Contractors, however, report their net self-employed income on line 10410 using either a T1 General form or Schedule 8 (Statement of Employment Expenses), and they must track and submit their own income records since no employer files paperwork on their behalf. Employee income reporting is straightforward because your employer handles most of the work for you. Here's what happens: - Your employer deducts income tax, CPP, and EI from each paycheque and sends these amounts to the CRA - By February 28th each year, you receive a T4 slip showing your total income and deductions - You report the T4 amount on your tax return without doing calculations - CRA already knows your income from your employer's report, which is why the system is automated This simplicity comes with a trade-off: you can only claim a limited list of employment expenses (mostly union dues, professional fees, and home office costs if you work from home at your employer's request).
No. Contractors do not receive T4 slips because they are not employees. Instead, you track your own income and report it on Schedule 8 or your T1 General form. If a client issues you a T5018 slip (in some provinces), that is only informational and not required for filing.
Both contractors and employees file by June 15th and must pay taxes by April 30th. However, contractors have an extra two weeks to file because they need more time to compile business records and calculate deductions. Employees must file by June 15th as well, but most file earlier.
Yes. Contractors can deduct any legitimate business expense related to earning income, including home office, vehicle, supplies, and equipment. Employees can only claim a small list of expenses like union dues and professional fees, making contractor deductions much broader.
Contractors must keep all invoices, receipts, and supporting documents for at least six years from the end of the year they were filed. This is the CRA's standard review period for self-employed individuals.
Contractors do not have automatic deductions, so if you expect to owe more than $3,000 at tax time, the CRA may require you to make quarterly installment payments. Using a tax estimator tool can help you determine if installments apply to you.