If you’re unsure whether you’re earning your income as an employee, or as someone who’s self-employed, you need to determine which is the case for income tax purposes. Guidance from the CRA can be found at Employee or Self-employed. Very broadly, this involves considering who has more control over your situation: you, or the one who’s paying you.
The nature of your income has to be separately determined for each income source you have. You could be an employee at one job, be it full-time or part-time, and you could also be self-employed from a separate contract or “gig”, whether full-time or part-time.
If you receive a regular paycheque with full government deductions at source (CPP, EI, tax) on a T4 slip, that means the person who’s paying you feels that you are their employee.
If you have a T4 slip, but you feel that you are in fact self-employed, you first need to discuss it with whomever is paying you, to try to reach common understanding, if it isn't already specified in a written agreement. Alternatively, a request for a ruling can be sent to the CRA. Here are the various CRA online portals for “Requesting a CPP/EI Ruling”:
- Income earner: Sign in to My Account (use this one if you are making the request for yourself)
- Employer: Sign in to My Business Account
- Representative: Sign in to Represent a Client
If you have received a T4 slip and you decide to file your tax return for that year as self-employed for the income from that source, it’s likely you’ll get a review letter from the CRA. An alternative to this is to include the income from the T4 slip on your return. Then, if the income is clearly determined to be self-employment, you can ask the CRA to amend the return if it has already been filed. Rideshare and food delivery drivers are typically self-employed.
For income from self-employment, use of a T2125 form (Statement of Business or Professional Activities, available in TurboTax) to declare business income and expenses.
