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House flipper payroll: crews, subs, and the misclassification line
On a flip, the person swinging the hammer is either your employee or an independent sub — and the answer comes from how the job actually runs, not from the invoice. Canada and the US mirror each other here: T4A against 1099-NEC, WSIB against state workers comp, CRA factors against the IRS test. Misclassify on a job site and one injury or audit can unwind the whole margin.
By the AnalytIQ Accounting team · Last reviewed: August 12, 2026
Pick your burden: general contractor or direct labour
The cleanest payroll position on a flip is having no payroll at all. A licensed general contractor prices the job, hires the trades, runs their comp and their remittances, and hands you one invoice — you pay more per project and carry almost none of the people risk. Direct labour flips that trade: better margin on paper, but you now own classification, injury coverage and remittances for everyone on site. Most flippers end up hybrid — a GC or key subs for the licensed trades, direct labour for demo, paint and finishing — and that hybrid zone is exactly where misclassification lives.
A third option sits between them: labour supplied through a staffing agency, where the agency is the employer of record and bills you an hourly rate. It costs more per hour than paying workers directly, but on short demo-heavy phases it buys you coverage and compliance without opening payroll accounts for a six-week job. Cash, by contrast, is toxic on a construction file — it is the first thing every auditor asks about and the one payment method that can never be papered after the fact.
Canadian flips: CRA factors, T4A slips, and WSIB
The CRA weighs control, ownership of tools, the ability to subcontract, and chance of profit or risk of loss. A true sub quotes the job, brings their own tools, eats their own overruns, and works for other builders. A sub who works your hours, on your tools, at an hourly rate, on every project you run, is an employee — with T4, CPP, EI and source deductions owing, plus penalties, if the CRA reassesses. Because flip profits are business income, there is no ambiguity about whether you are a payer with slip obligations: fees to unincorporated subs belong on T4A slips.
Ontario adds a second layer. WSIB coverage is mandatory in construction, including for most independent operators, and the home-renovation exemption applies when the occupant homeowner does the hiring — a flipper is a business, not the occupant, so it does not help you. Get a WSIB clearance certificate for every sub before releasing payment; without one, their unpaid premiums can become your bill.
US flips: W-9s, 1099-NEC, and the comp premium audit
Federally the IRS applies its common-law test, but the sharper edge is at state level, where many unemployment and comp statutes use stricter ABC-style tests. The mechanics that keep a US flip defensible:
- W-9 before the first draw. No TIN means 24% backup withholding — collect the form while you still have leverage.
- 1099-NEC for unincorporated subs once payments reach the reporting threshold — $2,000 for 2026 payments, up from the long-standing $600.
- Certificates of insurance from every sub. At your workers comp premium audit, payments to uninsured subs are treated as your payroll and premium-rated accordingly.
- Injury response. An uninsured worker hurt on your site claims against you — this, not the IRS, is how most flip misclassification actually blows up.
The two systems mirror each other
| People item | Canadian flip | US flip |
|---|---|---|
| Contractor slip | T4A (fees for services) | 1099-NEC |
| Employee slip and remittances | T4, with CPP, EI and tax withheld at source | W-2, with Form 941 deposits and FUTA |
| Injury coverage | WSIB — clearance certificates from subs | State workers comp — certificates of insurance |
| Classification test | CRA factors: control, tools, profit and loss | IRS common-law test, plus stricter state ABC tests |
| Who comes knocking | CRA and WSIB, often after an injury or EI claim | State UI and comp auditors, plus the IRS |
Cross-border crews, and what we set up
Two questions come up on nearly every call. First: no, your Ontario crew cannot work your Phoenix flip. Hands-on construction requires US work authorization, and business-visitor status does not cover swinging a hammer — hire local subs and keep the Canadian crew on Canadian projects. Second: paying a Canadian estimator or project manager who works from Canada is a Canadian-side cost — no 1099, but a W-8 in the file, and possibly a T4A on this side of the border.
Our setup for flip crews is a gate, not a cleanup: W-9 or WSIB clearance plus an insurance certificate collected before the first cheque, scope-priced sub agreements, and real payroll — Wagepoint in Canada, Gusto in the US — for the core crew that genuinely works your schedule. The tax structure those wages sit inside is covered on our page for Canadians flipping US houses.
Common questions.
If my sub is incorporated, am I safe?
Safer on slips — corporations are generally exempt from 1099-NEC — but incorporation does not settle classification, and in Ontario a WSIB clearance certificate is still required. How the job actually runs still controls.
What actually triggers a misclassification audit on a flip?
Injuries and claims: a worker hurt on site, a dropped sub filing for EI or state unemployment, or slips that contradict each other. These audits rarely start with the tax return.
Should my core demo and finishing crew be on payroll?
If they work your schedule on every project, yes. T4 or W-2 payroll for a core crew costs less than one reassessment with penalties, and it makes comp coverage and scheduling honest.
Related reading
Crews papered before the first cheque.
Book a consultation and get a plain answer on exactly what applies to you.