The reason why business owners need to be very aware of the difference between employees and contractors is source deductions says Edmonton bookkeeping. While employees get source deductions withheld from their paycheck, and an entrepreneur must remit that Canada revenue agency. Contractors on the other hand do not. They are considered during business, and will be required to ensure that they are paying source deductions when it comes time to do their taxes. However, business owners need to be aware that if there contractor does not remit source inductions on their own, it may end up in Canada revenue agency watching an investigation.
Ultimately, Edmonton bookkeeping says that what Canada revenue agency will be looking for during this investigation is who is going to be considered an employee, and will be considered a contractor. If the person that was hired as a contractor is deemed an employee, that could result in the business owner being assessed payment of back taxes as well as penalties on top of that. Therefore, business owners need to be aware of the difference between the two, and then ensure that they are hiring them correctly in their business.
The biggest differences between employees and contractors is one the amount of control that a business owner has over them, and to the model liability they have. While employees will have very little control, they will also have very little liability. It contractors on the other hand will have a lot of control over their schedule, but a lot of liability as well. It is important that an entrepreneur is aware of both of these things in hiring staff.
When a business owner is hiring a person for their business, they should ask themselves is important that the staff person is at work at a specific time, and stays a specific length of time, or that just important that they get their work done? Also, it is important for entrepreneurs to understand that if they are setting the wage for them, there are more likely going to be considered an employee. However, contractors typically tell business owners how much they will do the job for, and issue them an invoice.
Edmonton bookkeeping says that employees also bull not pay for their own expenses, they will not pay for their own supplies and materials, and typically do not own their own tools. All of these things are what contractor will be expected to do. Therefore, by helping a business owner understand the difference between employee and contractor can help ensure that they are hiring people correctly, so that they can remit source deductions correctly.
When business owners are able to remit source deductions accurately and correctly, they will minimize the risk of being assessed penalties by Canada revenue agency. By learning this, business owners can avoid this problem for the lifetime of their business. Ultimately, business owners may choose to hire employees only, and only hiring a contractor if they can prove that they have incorporated, completely eliminating a business owner’s risk.
Edmonton Bookkeeping | How To Hire Employees And Contractors
Business owners are ready to start hiring staff for their business, Edmonton bookkeeping says that they need to be very aware of the differences between employees and contractors. The reason why, is because there are very different rules on how to withhold and remit source deductions for each of them. If a business owner makes a mistake, it could end up negatively impacting their business financially, due to the penalties that they would incur.
In fact, business owners need to understand that Canada revenue agency issues the stiffest finds and penalties for improperly paid source deductions says Edmonton bookkeeping. The reason why, is because they view source deductions as government money being held in trust. If a business owner does not pass on that money properly, Canada revenue agency sees that as misusing government funds to fund a private corporation. Even if an entrepreneur does not withhold the source deductions properly, it still is their responsibility to remit to Canada revenue agency properly.
Any business owner that gets assessed with having to pay all of the source deductions for an employee that was improperly classified as a contractor, Edmonton bookkeeping says that a business owner should get ready to pay all of the employer and employee portions of CPP and EI, dating back to the first day that that worker was hired. Many business owners may think that they only have to all the source deductions for that tax year, that that is not correct. Therefore, the longer that a business owner has hired that worker, the higher the amount that they are going to have to pay will be.
Even more troubling than that, business owners will be assessed a penalty of 20% interest on that entire amount. However, this amount is not accrued per year or per month, it is accrued per day. Which can turn one thousand dollars into it will hundred dollars literally overnight. For this reason, business owners should do everything in their power to avoid being assessed this by Canada revenue agency. Whether that means ensuring that they hire only employees, and any contractors that they hire our independently incorporated. However, in order for an entrepreneur to ensure that they are avoiding this mistake, they need to understand how to avoid that mistake in the first place.
By understanding the difference between employees and contractors can help a business owner classify their workers correctly when they hire them. When they are able to avoid this error, they will be able to avoid financially burdening their business in a way that might be difficult for them to recover from. In fact, 29% of all failed entrepreneurs say that the reason why they failed is because they ran out of money. If the business owner assessment, they could very easily run out of money, and have to close their business. Business owners who avoid this circumstance, can avoid the penalties that are associated with it as well.