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Countable Ops Manual

Subcontractor’s Guide

Purpose

Make our labour practices transparent and provide support for team members who are new to subcontracting.

Scope

Currently covers taxes, categorization as a subcontractor, and the benefits of incorporating.

Also check out our template Subcontractor Agreement

Taxes

You have to claim self employment income once per year. We recommend using SimpleTax

  1. We suggest signing up with mint.com, as it makes tracking all your expenses simpler.
  2. Save all receipts for restaurants. You can deduct 50%
  3. Computer equipment, deduct % used for work.
  4. Internet, phone, deduct % used for work.
  5. Rent, deduct the percentage of the room used for work, times percentage of time working there.
  6. Deduct travel costs when working.
  7. Full list -CRA Business Expenses

Categorization as a Subcontractor

  1. You should supply your own computer equipment
  2. You should determine where, when and how the work will be done.
  3. Bears risk of loss, damage or delay.

Should You Incorporate?

This section is only if you’re in Canada for now.

  1. If you’re working full time, it’s likely worth it, otherwise probably not.
  2. It costs $400ish to incorporate (form a CCPC), plus $40/yr. You also need to spend a day or so on extra book keeping, and a day doing an extra tax return each year. You’ll likely want to pay an accountant $1000 to do the return for you, or get corporate tax software for $150 or up. The real cost is something like $2000 per year when you start.
  3. The main tax benefit is you can defer income to another year to stay in a lower tax bracket. The corporate tax rate for small businesses is only about 15%, so if you want to save money for several years it’s likely a good idea to leave that portion in your corporation rather than pay the 45% tax rate. If you’re going to save the money for quite a while, fill up your RRSPs first. Then start saving it in your CCPC.

Things You Can Deduct From Taxes

Countable doesn’t reimburse these things but if you’re a subcontractor you can deduct them from your income to avoid tax.

  • The percentage of your rent or mortgage interest used for work (divide the area and time you use by the total, ie 300 square feet out of 900 square feet, times 8 hours a day out of 24 hour a day, is 10% of your rent)
  • Any food or beveraged purchased and consumed during work hours.
  • Any equipment you use for work.