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Why business owners need to be able to understand the difference between employees and contractors says Edmonton bookkeeping is so that they can pay source deductions correctly. While contractors do not have source deductions withheld and remitted to Canada revenue agency. Employees on the other hand do. If an entrepreneur hires contractor in their business, and they do not remit source deductions, and Canada revenue agency later rules that they should have been considered an employee, not only are business owners have to pay the amount of source inductions that they should have from the beginning. But they will also incur a penalty associated with this as well.

In order to help a business owner avoid this problem in their business, Edmonton bookkeeping says they would simply need to understand the difference between a contractor and an employee. It ultimately comes down to amount of control that a business owner has over there employee or contractor. The more control they have, the more likely they are going to be considered an employee. For example, employees will have wage that is dictated by the business owner, have a schedule that is dictated by the business owner, and have to get whichever jobs that are required done by whatever means the business owner requires them to.

Contractors on the other hand have a lot of freedom when it comes to their work says Edmonton bookkeeping. They get to dictate how much money they charge the business owner to get the job done, they are able to come and go from the jobs that whenever they want, and pick which jobs they want to do, and how they get them done. However, business owners should keep in mind that this freedom comes at cost of having the ability to lose money on a job. If they do not price it properly, or by buying their own supplies and materials they do not recoup enough money, they might not profit. However, employees will always bring a profit home, because they do not have any risks associated with their job.

If a business owner has hired a contractor, and they did not pay Canada revenue agency the source inductions that they owed, Edmonton bookkeeping says that this might trigger an investigation. Canada revenue agency will review to see if they should be considered a contractor or an employee. If they should be considered an employee, a business owner will then have to pay all of the source deductions that they should have remitted since that person was hired. Therefore, the longer an entrepreneur has been doing this, the greater their risk.

By understanding the difference between employees and contractors can help entrepreneurs avoid making source deductions errors. By being very clear with contractors, and even drafting up an employment contract can help ensure that even if the contractor does not remit their source deductions themselves, that a business owner has covered themselves if Canada revenue agency investigates. By doing this, business owners can ensure that they are avoiding the penalties associated with making this mistake.

Edmonton Bookkeeping | Difference Is Between Contractors And Employees

It is very important for business owners to understand the difference between Boone employee is and who contractor is in their business says Edmonton bookkeeping. The reason why, is because the penalties that are associated with incorrectly remitting source deductions is the stiffest and out by Canada revenue agency. They view not being source deductions correctly as an misuse and abuse of government money. This source that actions is money that the business owner has taken from the staff and held in trust, and if they do not submit that to the government, then they consider that as using government money to fund private corporation. Therefore, business owners can avoid making this mistake, they can avoid the stiff penalties associated with it.

The penalties that business owners should expect to have if they have made this mistake, is not just paying the CPP and EI for their employee. But Edmonton bookkeeping says that business owners also have an employer portion of CPP and EI that they must remit as well. However long that person has been working for that is owner, means the more source deductions that they will end up owing. This can be a significant amount if they have worked several years for the business owner. Because it is not just the source deductions that are from the current year, Canada revenue agency will require all of the source deductions paid back.

In addition to that, business owners should expect to get penalty on top of what they already owe. Edmonton bookkeeping says that this is a 20% interest rate, but instead of being accrued over a year, it is being accrued on a daily basis. This means that the more money that an entrepreneur owes, will increase the amount that it is compounded, and grows. This can end it being a significant amount of money that a business owner will end up owing Canada revenue agency, and it can make it very difficult to dig themselves out from.

Since half of all entrepreneurs fail in their business endeavour, 29% of those failed businesses say that running out of money was the reason why they failed. Therefore, business owners can significantly impact that failure rate if they simply avoid incurring penalties from Canada revenue agency for incorrectly paid source deductions.

Many business owners may not take into consideration how the difference between employees and contractors can affect their business. However, anytime business owners hiring contractor they can either write up an employment contract, to outline the terms that the contract working for, so that if Canada revenue agency does an investigation, they will be able to see the employment contract. Another way that business owners can eliminate this risk a great Edmonton bookkeeping is to ensure that all contractors that they hire are all incorporated. By doing this, business owners are completely eliminating this risk from their business.