Canada revenue agency sees paying source deductions incorrectly, or late as a series of events says Edmonton bookkeeping. The reason why, is because the view source deductions as trust fund money. An entrepreneur is collecting the money from their employees on behalf of the government. If they either pay late, or pay the incorrect amount, this could trigger a payroll audit because Canada revenue agency will assume that the entrepreneur has kept that money in either used it to pay themselves, or to fund their business. Entrepreneurs should understand that the penalties associated with remitting the incorrect amount or remitting it late is some of the highest penalties that Canada revenue agency hands out.
One of the first things that entrepreneurs need to understand, is when T4 and T5 slips need to be filed. These are the slips that tell Canada revenue agency how much source deductions an entrepreneur has collected from their staff, as well as how much money the staff is been paid for salary, as well as how much dividends an entrepreneur has taken. The filing deadline for both T4 and T5 slips is the last day of February. If an entrepreneur does not filed the slips on time, it can end up triggering penalties. The penalties are per employee that an entrepreneur has, per day that the filing is late. The more employees an entrepreneur has says Edmonton bookkeeping, and the more days they are late increases the penalties.
The next thing that an entrepreneur needs to ensure, is that they pay the correct amount of source deductions. In order to understand how much they need to hold from their employees checks, an entrepreneur needs to know all of the taxes that come off of employees check. This is income tax, CPP as well as EI. However, Edmonton bookkeeping says that entrepreneurs also need to understand that as an employer, they also taxes as well. They need to ensure that they are paying CPP as well as EI, and the EI amount that they are paying is one point 4% higher than the employees portion.
However, if this is too difficult for entrepreneurs to remember, they should know that Canada revenue agency has a program that can help entrepreneurs figure out how much source deductions to withhold and remit to them. Also, any payroll software that an entrepreneur uses such as QuickBooks, QuickBooks online, Sage, or zero should also be able to tell an entrepreneur. Simply by using these programs, and entering in the employee’s salary, they will find out how much source deductions they owe Canada revenue agency.
Finally, an entrepreneur needs to ensure that there avoiding paying source deductions late. Edmonton bookkeeping says that the filing deadline for the majority of businesses is the fifteenth of the month, following the pay date. This means that if an entrepreneur has run payroll in January, February 15 is the deadline for there is source deductions. Although the recommendation would be for entrepreneurs to avoid waiting until the last day to pay Canada revenue agency. A good habit to get into is for business owners to pay the source deductions at the same time that they run payroll to avoid ever being late.
Edmonton Bookkeeping | Avoiding Triggering A Payroll Audit
Even though it can be very easy for entrepreneurs to avoid payroll audits in their business says Edmonton bookkeeping can also be very easy to do it incorrect as well. There are three things that business owners need to do to ensure that they are avoiding triggering a payroll audit in their business. The first need to ensure that they are paying their source deductions in the correct amount, that they are paying it on time, and that they are filing their T4 and T5 slips accurately and on time.
If an entrepreneur has made a mistake on any of these three areas, Canada revenue agency will send them a letter asking them to explain the discrepancy. Edmonton bookkeeping says that business owners should pay the amount that they owe Canada revenue agency, because if Canada revenue agency is not satisfied with their explanation, this could trigger a payroll audit. In fact, Edmonton bookkeeping recommends that entrepreneurs simply find out how much source deductions they should have paid prior to filing their T4 slips, so that they can send Canada revenue agency the correct amount, so that there is absolutely no discrepancy prior to filing their T4 slips.
However, if a business owner finds themselves in a payroll audit, they should be expected to hand over copies of their pay stubs, bank statements, and the report called a PD seven A which shows how much source deductions they should have paid. The reason why they are going to be looking at these things, is because the auditor is trying to figure out where the source deductions money went. They are going to try to determine if an entrepreneur used it to pay themselves personally, or fund their business.
The reason why Canada revenue agency takes a very serious stance on source deductions that have been paid incorrectly, is because they view it as a abuse of government money. Since an entrepreneur should be collecting the money from their staff in order to give it to the government, by using it to fund their business or pay themselves, they view it as stealing money from the government says Edmonton bookkeeping.
It can be very easy for entrepreneurs to learn what they need to do to avoid triggering a payroll audit in their business. By ensuring that they are paying source deductions in the correct amount, on time, as well as avoiding filing their T4 and T5 slips late, this is all a business owner needs to do to avoid triggering this audit. However, if entrepreneurs have discovered at the end of their year, that they have underpaid source deductions, they should understand that they have until January 15 every year to catch up on all outstanding amounts of source that actions that they owe. By doing this prior to filing, even if an entrepreneur has made a mistake, they can avoid triggering an audit in their business.