PSB (Personal Services Business) Risk & Cost Calculator
Work out your Personal Services Business (PSB) risk and the extra cost if the CRA reclassifies your corporation — full corporate rate plus 5%, denied deductions and dividend double-tax, for Ontario in 2026.
What a Personal Services Business reassessment actually costs your corporation
Since 2024, the Canada Revenue Agency has been running a dedicated compliance pilot targeting incorporated contractors it suspects are really employees in disguise — a Personal Services Business, or PSB, in CRA's language. If your corporation earns most of its income from providing your own personal services to one client, and would look, in substance, like an employee if the corporation didn't exist, the tax consequences of being reassessed as a PSB are severe, not gradual.
This calculator models what changes in 2026 if your corporation is treated as a PSB in Ontario: the corporate tax rate jumps, almost every deduction disappears, and dividends paid out of that income face a second layer of tax that the small-business-deduction rate was designed to avoid. Run your numbers before you decide how much risk you're comfortable carrying.
What changes if your corporation is reassessed as a PSB
- The corporate tax rate rises to roughly 31.5% — the general federal rate plus a 5% additional federal tax on PSB income, plus Ontario's general 11.5% rate — because a PSB cannot access the small business deduction at all.
- Almost all business expenses become non-deductible: a PSB can only deduct the salary and benefits actually paid to the incorporated worker, plus a narrow set of employment-related costs, not the broader expense categories an active business claims.
- Dividends paid out of PSB income lose the tax integration that the eligible/non-eligible dividend credits are meant to provide, so the same dollar can effectively be taxed twice — once at the higher corporate rate, then again as a dividend with a credit calibrated for a different, lower corporate rate.
- The reassessment is retroactive: the CRA can apply PSB treatment to prior tax years already filed, not just going forward, which is why our CRA misclassification back-tax calculator is worth running alongside this one.
