Business owners need to be very careful about how they withhold and remit source deductions says Edmonton bookkeeping. Because if they make any errors, the penalties that they face could be extremely steep. The reason why, is because Canada revenue agency views this as one of the most serious defences that a business owner could make, is using government funds that are being held in trust. Therefore, they hope that by having such steep penalties associated with it will act as a deterrent to ensure business owners are withholding and remitting source deductions correctly. However, many business owners have lots of questions that are associated with this can help them understand how to avoid making mistakes.
The first question that business owners often have, is what is the difference between a contractor and an employee? Ultimately, employees work directly for the business, and are under a lot of control by the business owner. For example, they get their wage that by the business owner, they have to adhere to a schedule, and they have to do all tasks that the business owner specifies, and in the way that they are asked to do it.
Contractors on the other hand says Edmonton bookkeeping work independently from the business, and therefore not only are they able to take on different jobs from different companies at the same time, are able to set their own rate of pay, and issue an invoice to the business owner, they set their own hours, and take care of their own expenses and by their own supplies. They also typically own their own tools, and have the ability to either profit or lose money on a job that they take on.
The second question that business owners often have is wise it important to know if they hired an employee or contractor? This is important to know says Edmonton bookkeeping, so that business owners can know when they should withhold source deductions from their pay and remit to Canada revenue agency or not. Since employees will have taxes withheld from their paycheck, and contractors will not is very important that entrepreneurs understand the difference between the two. If a business owner ends up making a mistake, and hiring a contractor that should have been deemed an employee, they not only will be expected to pay all the source that actions back that they have owed since the first day that contractor was hired. They also will have a stiff multi-of 20% interest on the entire amount being accrued per day.
The third question business owners have is what is the best thing that they can do to avoid a ruling by Canada revenue agency? This is very easy, all they have to do is understand the difference between an employee in a contractor, and ensure that they withhold source deductions correctly. They can also draft up an employment contract, that specifies who contractor, or simply ask all contractors to incorporate, or only hire incorporated contractors to eliminate this problem.
Edmonton Bookkeeping | Frequently Asked Questions About Source Deductions
It is very important that business owners understand that they could be at risk if they hire a contractor that should be considered an employee says Edmonton bookkeeping. The biggest reason why, is so that they can ensure that they are withholding and remitting source deductions correctly. If they do this incorrectly, not only are they going to be expected to pay all of the source deductions that they owe. But they will also be expected to pay a very stiff penalty. This penalty is 20% entire amount owed calculated every day. Meaning this can make a difficult amount to pay impossible to pay. Since 50% of all entrepreneurs in Canada fail, 29% of them fail because they ran out of money. As one way that business owners can impact that significantly. If they learn how to avoid this, that is one problem that will never cause them to run out of money in their business.
However, business owners have a lot of questions about source deductions, especially when it comes to employees and contractors. The first question that entrepreneurs have is how does the degree of control that a business owner has determine if they are an employee or contractor? Ultimately, Edmonton bookkeeping says that the difference between an employee and a contractor comes down to how much control the business owner has over them. For example, an employee does not get to choose their own wage, or set their own schedule, they will get paid the amount that the business owner tells them, giving them a wage increase when the business owner decides to. And will have a schedule for the employee to follow. Also, employees will never be able to lose money on their employment, they will only ever be able to profit and take money home.
Contractors on the other hand have a lot more freedom, that freedom comes at a cost. They set their own prices, and give business owners an invoice for their work that they have done. They also are allowed to hire their own staff to help get the job done, set their own hours and take care of their own expenses. Not only that, but they typically by their own supplies and materials, and own their own tools. A contractor has the ability to profit, or lose money in their endeavours. Therefore, business owners need to take these factors into consideration when they hire a contractor to figure if they should actually be considered an employee.
Business owners are able to understand the difference between employee and contractor, they will be able to higher each of them accordingly, and ensure that they are appropriately withholding source deductions. By learning how to do this, a business owner can eliminate the risk associated with hiring a contractor that should be considered an employee’s is Edmonton bookkeeping. By doing this, business owners will help ensure that they never have to pay stiff penalties, and put their business at risk of running out of money.