Business owners should take care to submit all paperwork and remittances to Canada revenue agency in a timely manner says Edmonton bookkeeping so that they can avoid being audited. However, one of the most important ways and an entrepreneur can avoid getting audited is when they learn how to remit payroll source deductions correctly and timely. The reason why is because the Canada revenue agency takes the harshest stance on source deductions being submitted improperly or late. If an entrepreneur is late filing or files the incorrect amount, it could end up triggering a payroll audit that could be very time-consuming and expensive for an entrepreneur to go through.
In order for an entrepreneur to avoid submitting the incorrect amount to Canada revenue agency, is by knowing how much source deductions they need to withhold from their employee’s checks, and also being aware that they need to submit an employer portion as well. Edmonton bookkeeping says there are actually five different taxes that an entrepreneur must ensure that they are collecting in order to remit to Canada revenue agency. There is the employer portion of CPP, the employee portion of CPP, the employer portion of EI, which is 1.4% higher than the employee portion, as well as the income tax portion. If an entrepreneur misses any of those amounts, like forgetting that there is an employer portion, or remitting the same amount of EI on their behalf as they are their employees, they could end up not having the correct amount of remittances.
Not only does it not have to remit the correct amount, they also have to remit it on time. The deadline for most businesses is the fifteenth of every month to remit payroll tax to CRA. Whichever month the payroll was in, the deadline will be the fifteenth of the following month. Therefore, a payroll in January will have a February 15 deadline. In order to avoid missing this deadline, Edmonton bookkeeping recommends that entrepreneurs do not wait until the fifteenth in order to submit this amount to Canada revenue agency. That leaves too many things to potentially go wrong, which could end up costing a business owner. Instead, one of the best practices is for entrepreneurs to remit payroll source deductions at the same time that they are running payroll. This way, an entrepreneur will never be late.
Even if an entrepreneur is one day late, the potential penalty is a 20% interest rate per day. This is even higher than most credit cards and is usually very financially crippling for an entrepreneur to try to pay. Canada revenue agency takes it very seriously to be late on payroll remittances, which is why the interest rate is so high. Therefore, when entrepreneurs are making a plan, they should plan to remit payroll source deductions at the same time they run payroll so there never late.
When business owners are earning how to run payroll, they should ensure that they have a plan in place to pay the correct amount well in advance of the deadline so they can avoid problems. By doing this, Edmonton bookkeeping says that entrepreneurs can not only avoid a penalty, they can also avoid being hit with a payroll audit that could cost them time and money.
Edmonton Bookkeeping | Avoiding Payroll Audits
It is very simple for entrepreneurs to learn how to avoid payroll audits in their business says Edmonton bookkeeping. All they have to do is remit the correct amount on time every time. There is several ways that entrepreneurs can create a plan that can help ensure that they are withholding the correct amount from their staff, and then paying it on a regular basis so that they can avoid being hit with an audit.
One of the first things that an entrepreneur can do, is creating an effective tax plan so that an entrepreneur will never have a problem making payroll tax. What this plan consists of according to Edmonton bookkeeping, is building up a savings in their out, that can act as a buffer. If an entrepreneur has financial difficulties, they have enough money in their bank account to pay their staff as well as the source deductions so that they do not have to worry about not paying the right amount or paying on time.
Creating a plan is extremely orange especially for business owners that are the only employee of the corporation, and they pay themselves a salary. If they have a plan in place, they can ensure that they are remitting payroll tax properly, so they can avoid having to make a huge remittance at the end of the year, causing financial hardship for their business.
The way CRA will be of the tell that an entrepreneur is behind on the payroll tax remittances is when an entrepreneur files their T fours. T fours are due on the last day of February, and by the time not nor has submitted that Canada revenue agency will be able to see how much business owners should have paid and remittances against what they have already submitted. If an entrepreneur ends up falling short, the Canada revenue agency will send the letter asking the business owner to explain the discrepancy. If a business owner cannot explain it, this will trigger a payroll audit.
Not only is that payroll audit going to be triggered, and an entrepreneur will have to deal with that 20% per day interest rate on the late amount, but also they need to take into consideration that Canada revenue agency is quite aggressive in collecting remittances. The reason why, is because the Canada revenue agency considers this money being held in trust, it does not belong to the business owner. Therefore they are very aggressive in ensuring they collect the money from the business owner.
Edmonton bookkeeping says that entrepreneurs can simply avoid running into payroll problems by collecting the correct amount of taxes and remitting them on time. when entrepreneurs do this, they will be able to avoid problems, avoid interest rates and avoid audits as well as ensuring that their employees getting paid regularly.