It is very important for entrepreneurs to understand how to run payroll properly according to Edmonton bookkeeping. If business owners make mistakes on the source deductions that they remit to Canada revenue agency, or if they remit them too late, it could end up triggering high penalties as well as audits that not only can time-consuming, but also expensive. It is very easy for entrepreneurs to learn the payroll rules, and once they know them, they can avoid making very costly mistakes.
Ultimately, in order for an entrepreneur to ensure that they are avoiding penalties and triggering audits in their running their payroll, all they have to do is understand how much source deductions to withhold and then remit to CRA, as well as when to remit payment. If an entrepreneur learns these two things, they can avoid running into any problems from the Canada revenue agency.
The first thing business owners should learn is what payroll taxes they must withhold from their employees, as well as how much they must contribute as an employer. There are five components that entrepreneurs need to ensure that they are calculated to take off their employee’s checks, to ensure that they are doing it properly. There is the employee portion of CPP and EI, as well as the employer portion of CPP and EI. One thing those business owners should take note of is that the employer portion of EI is actually one point 4% higher than what they will withhold from the employee’s checks. In addition to that, business owners also have to withhold income tax as well.
Once an entrepreneur knows how to withhold the correct amount of taxes, and what taxes they must remit themselves, business owners then need to be sure that they are remitting the payment on time, or ahead of time. Edmonton bookkeeping says that the due date for payroll remittances is the fifteenth of the month following the month that payroll was in. For example, if the payroll was in May, June 15 is the deadline to submit source deductions to the Canada revenue agency.
Knowing when the deadline is is important, however, Edmonton bookkeeping recommends that entrepreneurs do not wait until the deadline date to submit payment. Too much could go wrong that would cost an entrepreneur a lot in late penalties. Therefore, best practices is for an entrepreneur to remit payment at the same time they are calculating payroll for their employees. This way, they will ensure that they never forget, and then never be late.
Once an entrepreneur is aware of the source deductions they must withhold from their employees and remit to Canada revenue agency and when the deadline is, they should be able to avoid all payroll problems. If they are late or remit the wrong amount, they could get hit with penalties of 20% interest, and potentially triggering audits. By understanding how to properly remit source deductions to Canada revenue agency, entrepreneurs can focus their time and attention on more important matters like growing their business.
Edmonton Bookkeeping | How To Avoid A Payroll Audit
If business owners are not aware of the rules when it comes to how much payroll tax to remit, and when the deadline is, it can end up costing an entrepreneur in late fees and penalties, and it can even trigger an audit says Edmonton bookkeeping. Not only do entrepreneurs need to know what the rules are, but they should fully understand the penalties associated with doing it incorrectly so that they can be sure that there doing it correctly consistently.
The penalty for business owners who are late in remitting their source deductions is 20% after even just one day. This is higher than credit card interest, and it can be extremely difficult for entrepreneurs to pay, especially as its added on every day that they are late. The reason why so high says and bookkeeping is because Canada revenue agency wants it to be a deterrent. If entrepreneurs are aware of how steep the penalties are for remitting late, their hope is they will not remit late.
The reason why Canada revenue agency has such steep penalties is that they view the source deductions as trust fund money. The money is not the business owners to use, they withheld it from their staff, and it belongs to Canada revenue agency. If an entrepreneur does not remit it on time or does not remit enough, Canada revenue agency sees this as abusing trust fund money.
If a business owner is remitting source deductions on time every month, but they’re not to remitting the correct amount, Canada revenue agency will discover this when the business owner files their T fours. In the T fours will be the amount of how much payroll tax not nor should have submitted, and Canada revenue agency will match that against what they have paid. If the amount does not match, the Canada revenue agency will send the business owner letter requesting them to explain the difference. If the entrepreneur cannot explain it, or the explanations and satisfactory, CRA will issue a payroll audit.
An entrepreneur should be sure that there remitting the correct amount of taxes, but when they are working on their T4 filing, if they realize that they are short the amount that they should pay, for they complete their T4 filing, they can remit the correct amount of taxes that they owe to Canada revenue agency before January 15. If they do this, they should be able to avoid CRA sending them a letter, and triggering an audit says Edmonton Bookkeeping.
When entrepreneurs understand the steep penalties that are associated with sending the wrong payroll taxes to Canada revenue agency, he can be certain to create a plan that can help them avoid making mistakes. Once they have this plan in place, business owners can turn their attention to activities that will help them grow their business and become successful.