Business owners need to realize that there is a difference between employees and contractors, especially in the source deductions that they must hold from their pay says Edmonton bookkeeping. If a business owner hires an employee, but pays them as a contractor so that they do not have to withhold the source deductions, they may be putting their business at risk. If Canada revenue agency does not assessment, and finds that the contractor shall actually be classified as an employee, a business owner will not only have to pay all the source of actions that they owe, but they will also get penalized as well.
The penalties that Canada revenue agency issues for this are the largest ones that they hand out. The reason why, is because the view source deductions as government money being held in trust. Failure to pass them on to the government will be considered misuse of these government funds. Especially if an entrepreneur has then spent the money in their business either on paying bills, or paying themselves, that will be seen as using government money to fund a private corporation. Therefore, business owners should avoid this scenario at all costs.
The penalties that business owners will face will be a 20% interest, and that is interest that is accrued every day. They will also have that interest add up every day that they have not paid, which can end up adding up very significantly. Business owners also will be expected to pay the source that actions not just the employee portion, but the employer portion and dating back to the very first day that the contractor was hired. Therefore, entrepreneurs should be taking great care in figuring out who is an employee and who is a contractor in their business.
When way that business owners can ensure that they are safeguarding themselves against this scenario, is by creating a very clear employment contract, outlining all of the things that will be needed to be determined by Canada revenue agency. If they are a contractor, the employment contract can outline who owns the tools, who is responsible for paying certain bills, and who is buying supplies and materials. Typically, Edmonton bookkeeping says that contractors usually look after these things. Especially if a business owner has decided that they would like the contractors to use their own tools, or that the business owner is going to be buying some of the supplies. By having a contract, business owners can protect themselves, if Canada revenue agency has any questions about who is a contractor in their business.
By understanding the difference between contractors and employees can help business owners significantly says Edmonton bookkeeping. It can help ensure that they protect themselves, and either ensure that they are hiring employees, or that they have a contract with their contractors to ensure that they are covered in the events that Canada revenue agency has any questions for them.
Edmonton Bookkeeping | Is There A Difference Between Contractors And Employees
Business owners who do not think that there is a big difference between employees and contractors, could find themselves in trouble says Edmonton bookkeeping. If think that they will be able to save themselves paying source deductions if they call the employees contractors, Canada revenue agency may investigate. If they discover that there are contractors that should be classified as employees instead, not only will they have to pay all of the source deductions that are owed, they will also be assessed very steep penalties as well.
When a business owner hires a contractor, the should be paying them the amount that the contractor has invoiced the business owner. And because of that, an entrepreneur does not need to withhold source deductions from the amount they pay the contractor. The responsibilities on the contractor to let the government know how much they owe in the source deductions and pay it themselves. However, if a contractor does not pay the right source deductions, and Canada revenue agency investigates, there will be a problem if they determine the contractor should have been considered an employee.
Canada revenue agency who is investigating may send a questionnaire directly to the person in question, and not to the business owner themselves. The will be getting asked several questions, that are designed to help the Canada revenue agency auditor determine if they should be classified as an employer not. Ultimately, Edmonton bookkeeping says that the questions are going to be deciding how much control the business owner has over that person. The more control, the more likely they will be considered an employee.
Some examples of the questions that Canada revenue agency will use to make this determination include who controls the schedule? If the business owner dictates when that person is going to come to work, how long they stay and when they can leave, that is going to be considered more like an employee than a contractor. Another question that they will ask, is how do they get paid? Employees typically make an hourly wage or salary, and that amount is dictated by the business owner. Contractors typically tell the business owner how much their hourly rate is, and will hand entrepreneurs a bill for their services at the end of the day. Other questions that will be used to make this determination include who pays the bills of the project, who buys the supplies and materials, and who owns the tools that the contractor is using?
Ultimately, Canada revenue agency will make a ruling, and if a business owner wishes to appeal they have ninety days says Edmonton bookkeeping. Once the file is open, the business owner can make their claim, but ultimately if Canada revenue agency deems them as employees, chances are that Canada revenue agency will assess them the penalties, and there will be little a business owner can do about it. Therefore, entrepreneurs need to ensure that there being very clear on who is an employee and who is a contractor. By being very clear can help protect an employer from being assessed penalties, and having to pay stiff fines.