Accounting & Tax Services for Independent Contractors & Trades in Canada
Accounting and tax for Canadian independent contractors in trades, services, and consulting roles. T2125 self-employment reporting, GST/HST, vehicle and home-office deductions, employee-vs-contractor classification, and incorporation analysis.
Independent contracting in Canada
"Independent contractor" covers a broad range of Canadians: trades who work through their own one-person business, IT and management consultants engaged on contract, sales representatives paid by commission, healthcare professionals working as locums, and many others. The common thread is that the worker is in business for themselves rather than employed by the engaging party. The tax treatment, the deductibility of expenses, and the planning opportunities all differ significantly from employment.
The critical underlying risk is misclassification. CRA aggressively audits arrangements where a worker functions essentially as an employee but is treated as a contractor by the engaging party. Reclassification creates retroactive liability for the engaging party (back source deductions, penalties, interest) and can also affect the contractor's deductions and CPP position. Proper structure and documentation matter.
Who we serve
- Trades operating as sole proprietors (electricians, plumbers, carpenters, painters, etc.)
- IT and management consultants on contract assignments
- Healthcare locums
- Commission salespeople
- Independent project managers and freelancers
- Service contractors (cleaning, landscaping, snow removal, security)
The employee vs contractor test
CRA uses a four-factor common-law test:
- Control. Does the engaging party control how, when, and where the work is done?
- Ownership of tools. Does the worker own and provide the major tools used in the work?
- Chance of profit and risk of loss. Does the worker have a real chance to profit and bear real risk of loss?
- Integration. Is the work integrated into the engaging party's business in the way an employee's work would be?
No single factor is decisive. The substance of the relationship governs over written labels. Written contractor agreements help but do not override the test. We review contractor arrangements and recommend structural changes where the substance and the labels don't match.
Expenses deductible by independent contractors
- Materials and supplies consumed in the business
- Vehicle expenses based on business-use percentage with proper kilometre log
- Home-office expenses based on business-use percentage of the home
- Tools and equipment (CCA for capital items, immediate expense for items under the capital threshold)
- Insurance (business liability, errors and omissions, vehicle business portion)
- Professional fees (accounting, legal)
- Communications (cellphone, internet portion)
- Marketing (website, business cards, advertising)
- Training and professional development
- Business meals (50% deductible)
- Travel for business (transportation, accommodation, meals at 50%)
GST/HST for contractors
Most contractors crossing $30,000 in revenue must register for GST/HST. The Quick Method election can produce meaningful tax savings for service-based contractors with low input costs. Contractors selling outside their home province face the multi-province sales tax compliance complexity discussed in our e-commerce section.
What Canadian businesses commonly miss about this service
Across the hundreds of Canadian businesses we work with, the same handful of issues come up repeatedly. Many small business owners delay engaging professional accounting until a crisis: a CRA review letter, an unfiled GST/HST return demand, a denied bank loan because financial statements aren't ready, or a Notice of Reassessment that arrived weeks ago. By the time we are first contacted, the cost to fix the problem is often several times what proper ongoing accounting would have cost from the start. Proactive engagement is dramatically cheaper than reactive cleanup.
The Canadian tax landscape also changes constantly. Recent changes that affect most Canadian taxpayers include the 2023 anti-flipping rule (residential real estate sold within 365 days is automatically business income, not capital gain); the Underused Housing Tax (UHT-2900 annual filing requirement for many corporations, partnerships, and trusts holding residential property even when no tax is owing — with $5,000 to $10,000 per-property failure-to-file penalties); the Quebec QST joint registration changes since 2021; the post-2018 Tax on Split Income (TOSI) rules that effectively eliminated casual income splitting through family dividends; the post-2021 $200,000 stock option vesting limit on the 50% deduction for options granted by non-CCPCs; the CSRS 4200 Compilation Engagement standard replacing the older Notice to Reader engagement; and ongoing CRA increased scrutiny on pre-construction assignments, short-term rental businesses, and cash businesses.
How BOMCAS Canada delivers this service
Every engagement begins with a written, fixed-fee engagement letter signed before any work is performed. The engagement letter describes exactly what is in scope, what deliverables you will receive, when those deliverables are due, what your monthly or project fee is, and what (if anything) is outside scope. This eliminates the hourly-billing surprise that most accounting clients fear. The only time we use hourly billing is for genuinely unpredictable items such as CRA audit response or complex one-off projects — and even then we agree to a maximum cap before starting.
Once the engagement letter is signed, you e-sign the CRA authorization (RC59 for businesses or AUT-01 for individuals), and we onboard you to the encrypted client portal with multi-factor authentication. All document exchange flows through the portal — no emailing of sensitive financial documents. Meetings happen by video conference or phone at times that work for you, including outside normal business hours when needed.
Our Canadian tax compliance philosophy
BOMCAS Canada is structured around four operating principles:
- Tell the truth. If a tax position is aggressive, we say so. If a deduction will not survive a CRA review, we say so. If the engagement is going to cost more than originally quoted because the scope changed, we say so before doing the work.
- Bill what we said we would bill. No surprise invoices. No scope-creep billing. If something legitimately changes scope, we discuss it and re-quote before doing the additional work.
- Answer the phone. One-business-day response standard on client communications during normal business hours. No voicemail backlogs.
- Specialize. Canadian tax and accounting is too complex to be a generalist. We do not do US-only tax, UK tax, or any other foreign jurisdiction in isolation. We are Canadian. Our cross-border work is always anchored by deep Canadian compliance.
What ongoing engagement with BOMCAS Canada looks like
For most clients, the ongoing relationship is structured around predictable monthly deliverables. For an incorporated small business client, that typically includes: monthly cloud bookkeeping with full bank and credit card reconciliation; quarterly or annual GST/HST returns prepared and filed; monthly payroll for owner-managers and any employees, with CRA source deduction remittances; year-end Compilation Engagement (CSRS 4200) financial statements; T2 corporate income tax return; owner-manager T1 personal tax return (and spouse where applicable); annual salary-vs-dividend optimization with written recommendation; unlimited email and phone support during business hours; one quarterly check-in call to review numbers and discuss the business; and CRA correspondence handling for routine review letters.
For a personal tax client, the ongoing engagement includes: annual T1 preparation; any required Quebec TP-1 (for Quebec residents); CRA pre-assessment and post-assessment review response when CRA requests additional documentation; Notice of Assessment reconciliation; and proactive tax planning conversations during the year about RRSP, TFSA, and FHSA contributions, major life events (marriage, kids, retirement, real estate), and any planned business or investment changes.
Frequently asked questions about engaging BOMCAS Canada
How do I get started?
Are your fees fixed or hourly?
Can I switch from my current accountant?
How are documents exchanged?
Do you work with my industry?
Why Canadian businesses choose specialized accounting over generalist accounting
The Canadian tax and accounting landscape has become significantly more complex over the past decade. The 2018 TOSI rules, the 2021 changes to stock option taxation, the 2022 mandatory reporting changes for trusts, the 2023 anti-flipping rule, the Underused Housing Tax, the changes to the small business deduction phase-out for passive investment income, the new CSRS 4200 Compilation Engagement standard, the continued expansion of digital sales tax rules, and the ongoing post-COVID CRA focus on cash businesses and unreported income have all required accountants to specialize more deeply. A generalist firm trying to cover personal tax, corporate tax, US tax, real estate, trusts, cross-border, and every industry vertical inevitably falls behind on the depth of expertise that any one client needs.
BOMCAS Canada is structured deliberately to maintain depth: we are Canadian-only by design; we work in industries where we have genuine specialized experience; we maintain ongoing professional education in Canadian tax law; we use Canadian-experienced staff at every level; and we coordinate with specialized partners (US-licensed cross-border, legal counsel for corporate restructuring, audit-engagement licensed practitioners) where required rather than trying to handle everything in-house.
Talk to a Canadian accountant who knows your industry
Call 780-667-5250 or submit the contact form. We respond within one business day.