Business owners need to make it very clear when they are hiring staff if they are going to be considered an employee or a contractor says Edmonton bookkeeping. The reason why it is important, is because if they hire contractors, they will not get source adduction withheld from their pay. And if they hire an employee, they will have source deductions being withheld from their pay. However, it is very important that business owners are not accidentally hiring contractors that should be considered employees, because the agency will find that they are not paying source deductions, and start an investigation to find out why.
Ultimately, business owners need to be sure that they are hiring employees and contractors correctly to ensure that they are avoiding problems with Canada revenue agency. Contractors are required to do their own year-end taxes, and disclosed Canada revenue agency how much in source deductions they need to pay. If make a mistake and higher a contractor that should be classified as an employee, is that no one will end up paying the source deductions, and that will trigger an audit by Canada revenue agency. Canada revenue agency may not investigate immediately says Edmonton bookkeeping. And entrepreneurs that are currently making this mistake may claim that they cannot been investigated by Canada revenue agency for several years. However, business owners need to understand that this is a huge liability that they need to avoid. If they do not get investigated by Canada revenue agency now, chances are they will later, so they should minimize this risk immediately.
What Canada revenue agency will be investigating before, is to determine if the contractor should actually be considered an employee. If they get considered an employee, Edmonton bookkeeping says that the employer will be responsible for paying all of the source deductions that they should have remitted, dating all the way back to the first day that they started working for the business owner. This can end up being a significant amount, especially if an entrepreneur has worked this contractor for several years.
With how Canada revenue agency auditor will make this determination, is by figuring out the degree of control that a business owner has over that worker, and how much liability that worker has themselves. Ultimately, ten bookkeeping says the more control that a business owner has over the person, will be more likely to determine them to be an employee. The more liability that the worker has, the more likely they will be considered a contractor. Ultimately, it is not a black-and-white question with black-and-white answer, therefore business owners need to be very aware of intent.
In order to avoid being hit with this penalty, entrepreneurs can either create an employment contract that is very clear on the terms of appointment, that they are an employee or contractor. More they can simply insist that all contractors that they hire our incorporated, and once they are the business owner will minimi no longer have any liability.
Edmonton Bookkeeping | Does Being A Contractor Or Employee Make A Difference
When business owners are hiring staff for the first time in their business, they need to ensure that they are being very aware of the differences between employees and contractors says Edmonton bookkeeping. While employees will have source deductions withheld their pay. Contractors on the other hand will not. Therefore, some business owners might decide to classify all employees as contractors, so that they do not have to worry about calculating and paying source deductions. However this is a huge risk to a business owner.
The risk is when those employees who are classified as contractors do their year-end taxes says Edmonton bookkeeping, if they do not disclose the amount of money that they made and did not pay source deductions to Canada revenue agency. While they are responsible for paying the source deductions themselves, many employees will not want to pay this, and therefore Canada revenue agency may see the discrepancy. That no one has paid source deductions for that person, and will launch an investigation.
Ultimately, business owners can avoid this situation by figuring out the source deductions for all employees, and holding them and paying them correctly. Edmonton bookkeeping says that they can do this by ensuring that there calculating the correct income taxes, CPP and EI to uphold from the employees paychecks. As well they need to understand that they is an employer will also owe CPP and EI. By doing these correctly, and then remitting them to Canada revenue agency, business owners can minimize their liability.
Edmonton bookkeeping says that business owners also have to ensure that they are remitting source deductions to Canada revenue agency correctly as well. What this means, is that for every pay period that they have, this was deductions are due at Canada revenue agency by the fifteenth day of the following month. However, business owners should avoid paying it that late, because they could leave it to chance that they might pay late, or something that could happen and cause the payment to not reach Canada revenue agency on that day. If they find that this happens, they may be incurring penalties that they could have easily avoided.
Therefore, business owners need to ensure that not only are they careful to hire employees, but that those employees will have the correct source deductions withheld from their paychecks, and then remitted to Canada revenue agency. However, if an entrepreneur truly wants to hire a contractor, they can either do one of two things. Either create an employment contract, that outline all of the necessary specifications of appointment. Or, an entrepreneur can simply ensure that every contractor that they hire is incorporated. By doing this, a business owner can completely eliminate their liability.
Avoiding source deductions penalties from Canada revenue agency can be very simple once an entrepreneur knows what to avoid doing in their business. By learning how, business owners will never put their business at risk financially for making this error.