Canada revenue agency sees incorrect payment of source deductions as a serious a fence says Edmonton bookkeeping. The reason why, is because they view source deductions payments as trust fund money. When an entrepreneur collects the money, or withholds that money from employees checks, on behalf of the government, and then fails to give that money to the government, they consider that huge problem. If an entrepreneur then uses that money to pay themselves, or pay bills in the business, they view it as an abuse of government funds. Because of that, the penalties are extremely high. Some of the highest penalties that Canada revenue agency hands out are due to a failure to pay source deductions correctly. If entrepreneurs want to avoid paying penalties and triggering payroll audits, they should learn what they need to do to pay source deductions accurately.
It is extremely important that entrepreneurs understand that a T4 slip is where all of the source deductions are being recorded. This means for every staff that gets a salary, including a business owner, they need to have the taxes such as income tax, CPP and EI being withheld from those checks. If an entrepreneur takes a salary, Edmonton bookkeeping says that they also need to withhold those amounts from their own check as well. In addition to that, entrepreneurs also need to ensure that they are remitting CPP and EI on behalf of the company as well.
The T4 slips need to be filed along with T5 slips, which is where all of the dividends shareholders have taken are calculated. The filing deadline for both T4 and T5 slips is the last day of February. Edmonton bookkeeping says that if entrepreneurs do not file on this day, they will trigger penalties. The penalties include a dollar amount for every employee that they have, for every day that they are late. Therefore, this can add up extremely quick, especially if an entrepreneur has several employees, or if they file extremely late.
It is then very important that entrepreneurs understand, that since the T4 calculates all of the payroll deductions that they need to pay, that they know when they need to submit their payroll remittances to Canada revenue agency. Since payroll remittances are calculated per payroll, whichever month that an entrepreneur has run that payroll in, needs to have the source deductions made by the fifteenth of the following month. For example is Edmonton bookkeeping, if an entrepreneur runs payroll in January, the source deductions are due by February 15. If entrepreneurs miss the filing deadline, they should be expected to be contacted by Canada revenue agency. However, if they file on time, but the incorrect amount, they will not find this out until the end of the year when they file their T4 slips. Therefore, it is extremely important that they keep extremely good track of how much source deductions they need to withhold, and send that exact amount off on time.
Edmonton Bookkeeping | How Business Owners Can Avoid Triggering A Payroll Audit
It can be very simple for business owners to learn what to do about source deductions so that they can avoid triggering a payroll audit says Edmonton bookkeeping. Not only can payroll audits take up a significant amount of the entrepreneur’s time, inconveniencing them, and causing problems in the business. But also, payroll audits are usually accompanied by stiff penalties and fines. Since 29% of failed entrepreneurs end up failing because they run out of money, avoiding being hit with fines is extremely important.
In order to avoid a payroll audit, Edmonton bookkeeping says that there are two things that entrepreneurs can simply avoid. They can avoid paying source deductions late, and pay the correct amount. An entrepreneur needs to understand that they need to withhold income tax, CPP and EI from their employees checks, but they also need to withhold that amount from their own check if they are taking a salary. In addition to that, there is also an employer portion of CPP and EI that entrepreneurs need to pay on behalf of the business. This can all be very confusing, however if an entrepreneur is using any payroll or accounting software such as QuickBooks, QuickBooks online, Sage or zero, then they will be able to calculate their easily how much source deductions they need to withhold. Or, they can simply go to the Canada revenue agency website, and use a program that can help them understand how much they need to withhold from each of their employees checks once they submit their payroll amount.
By understanding how much source deductions to withhold and then pay to Canada revenue agency, and by knowing to have those permitted by the fifteenth of every month, entrepreneurs can avoid triggering penalties and payroll audits. In fact, Edmonton bookkeeping recommends that entrepreneurs of need waiting until the fifteenth of the month in order to submit payroll remittances. In fact, a much better approach would be for entrepreneurs to simply send the payroll remittances to Canada revenue agency at the same time that they run payroll. The first reason is because entrepreneurs are already figuring out the calculation of what source that actions need to be withheld, that they can simply send Canada revenue agency a payment for the same amount. Since source deductions only become do once payroll is run, by submitting them at the same time, Edmonton bookkeeping says that entrepreneurs are avoiding ever being late.
Many people wonder how Canada revenue agency actually finds out if they have paid enough in source deductions. Canada revenue agency understands this when they file their T4 slips. It will show entrepreneurs how much they should have paid, and if they have underpaid, it will trigger penalties as well as potential payroll audits. Therefore, entrepreneurs should understand how much source deductions they need to pay, and then verify that they are paying that amount. However, if they double check their T4 slip prior to filing, Edmonton bookkeeping says that they can verify that they paid the correct amount. If they have not paid the correct amount, they can simply send a payment to Canada revenue agency prior to filing their T4 slips to avoid triggering penalties and audits in their business.