Just to add... If you go down the contractor route. You also have to factor in insurance for yourself as a self employed person, i.e liability as a example. That will add to your expenses.
Doesent the OP need to pay GST as well on services rendered?
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I realize this is foreign material for most of you. But the difference in pay is NOT 5$/hr. It's not what you make that is important, it is what you take home.
Employee
Hourly 60$ + 4% vac pay=$62.50/hr minus effective tax rate and all deductions(40%, more like 42%, but we can call it 40), gives you a total take home hourly pay of $37.50 x 160hours/month = $6000
Contract
Hourly 65$ minus effective tax rate including average write offs for year end(25%) gives you total take home hourly pay of $48.75 x 160hours/month = $7800
Yes I used my personal and very normal average situation to calculate those numbers. The OP's may very well be different.
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Yes and no. As a contractor he would be invoicing 5% above the 65$/hr for GST. And then just handing that 5% over to the government. It's a moot point basically.This quote is hidden because you are ignoring this member. Show Quote
Yeah, so marth
lol, so true. $65/hr for 2000hr = $130K. He doesn't even break into the 2nd bracket of AB tax or 4th bracket of Federal one. He's effective take home is about 71% after AB tax/Fed tax/CPP/EI.This quote is hidden because you are ignoring this member. Show Quote
29%, not 42%.
source:
https://simpletax.ca/calculator
First of all, it's $65 vs $70This quote is hidden because you are ignoring this member. Show Quote
But keeping with what you got there using the proper rate:
$60+4% = $62.50 * 71% = 44.38 *160 = $7100.
Again, you charges more, so you'll have income that will be in higher bracket and in higher tax rate. So your formula works (to a degree) for someone that charges more than $70/hr. Not at OP's rate.
Also, keeping money in corp has less of an advantage now. So that removes another reason.
Last edited by Xtrema; 08-19-2019 at 02:23 PM.
Not to mention that his deductions are effectively subsidized, since if he was inc he would have to pay employee and employer portionsThis quote is hidden because you are ignoring this member. Show Quote
How are you getting 42% tax? You know it's tiered right?This quote is hidden because you are ignoring this member. Show Quote
To give him benefit of the doubt, he probably have significant portion that clears well over $160K per year, so he may have significant portion in that bracket.This quote is hidden because you are ignoring this member. Show Quote
Ah, the ol' humble-brag approachThis quote is hidden because you are ignoring this member. Show Quote
So you guys haven't contracted. You've apparently never had a job either, or if you have you haven't cared to examine your gross vs net pay difference. And have no understanding of the difference between tax rate and total deductions. That's cool though, I'm sure you're all more knowledgeable than anyone who has done both or any certified accountants. . Good luck to OP.
I think a lot of people here have done it and currently doing it and we are telling you as of 2019, there is very little incentive to contract if you don't clear over $130K per year especially with a single customer or unless you have a very creative expense scheme that CRA has not caught on yet.This quote is hidden because you are ignoring this member. Show Quote
There are a lot of people who plays the CRA audit roulette too.
Last edited by Xtrema; 08-19-2019 at 03:18 PM.
Three things to never do when you walk into a room full of people:This quote is hidden because you are ignoring this member. Show Quote
1. Assume you are the best looking
2. Assume you know more than everyone else/ are smartest
3. Assume you are the richest
Some good information here fellas. Take heed.This quote is hidden because you are ignoring this member. Show Quote
https://www.ey.com/ca/en/services/ta...9-personal-tax
Do $160K.
Even adding CPP/EI, you'll get nowhere near 42% average tax rate.
Misterman is the new Gestalt. Now with spellchecker!
that's a good calculator. If you type in 130k ($65/hr), it will show your marginal tax rate as 36% and the ineligible dividends marginal tax rate at 28.5%. I see that as showing the tax advantage in AB between employee->corp is < 8%This quote is hidden because you are ignoring this member. Show Quote
You won't even hit an average of 42% in AB until you hit around $430K.This quote is hidden because you are ignoring this member. Show Quote
Yeah but then your corp pays taxes, which makes up the difference.This quote is hidden because you are ignoring this member. Show Quote
+30% pay over and above employee rate is the break even for going contracting in many fields.
$5 on $65 is a joke, take the temp employee option as fast as you can.
I can eat more hot wings than you.
If he is talking about all deductions, I can see 42% being accurate. If I use my gross number and multiply it by 42% I get close to my net. I make no where near 430k. I do pay a small portion of my medical coverage though.
Edit.....besides the point. *Temp. employee for the win
Last edited by arcticcat522; 08-19-2019 at 08:19 PM.