We have learned of an Independent Owner Operator (IO/O) who is the director of a corporation with no employees. His Articles of Incorporation list both him and his wife as directors – and, so far as they are concerned, there are no other people involved in the company.
Like many IO/Os, he splits income for taxation purposes – perfectly in accordance with Canada Revenue Agency rules. But on reviewing the shared information from CRA, the WSIB decided that his two children – with whom there was also income splitting – were employees. They determined that the IO/O was, in fact, an employer and they assessed premiums against him – retroactive for two years!
Now here’s the problem – these kids are NOT employees. CRA permits the splitting of income and that does NOT create an employer/employee relationship. There is no contract of service, no service performed, and hence no need for premiums. WSIB says they wrote a letter to the employer asking for clarification but when he didn’t respond, they simply went ahead and issued their order for the back premiums. They wrote to the IO/O on September 30, 2010 and followed up by telephone on October 13. They were advised that both the IO/O and his accountant were on vacation, but they just went ahead and ruled against him rather than await his return.
They waited two weeks! That must set a new record for decision-making at WSIB.
In subsequent discussion with the manager in charge at WSIB, she refuses to even consider that this decision was simply wrong and offers the appeal process instead. There is no reason this IO/O should need to go through the expense of an appeal over a situation so inane.
It is quite clear the WSIB rushed to judgment and has an incomplete understanding of the concept of income splitting. There is not a lot of value to them connecting with CRA if they can’t grasp the information the taxman gives them.
Posted by Paul Harris