Business owners may not understand why it is important to understand the differences between employees and contractors says Edmonton bookkeeping. But ultimately, the reason why, is so that they can understand who should get source deductions withheld from their pay, and who should not. By understanding this, can help business owners ensure they are not making mistakes when it comes to source deductions.
Reason why business owners need to be very aware of mistakes on source deductions, is because this is considered one of the most serious advances to make mistakes on says Canada revenue agency. The reason why says Edmonton bookkeeping, is because Canada revenue agency views source deductions as government money that is being held in trust. If a business owner does not collect it properly, or sit on properly, they view that as a misuse or abuse of government money. If a business owner withholds it correctly, but does not paid on to Canada revenue agency correctly, either not the right amount, or not on time, they will view that as using government money to fund a private corporation, which is seen as a vary serious events.
Because of how seriously they view it, it has some of the highest penalties that Canada revenue agency issues. The first thing that business owners can expect, is that if Canada revenue agency finds out that they have not remitted source deductions properly, they will be assessed at having to pay all of the source deductions that they owe in full immediately. This means not just the employee income taxes, CPP and EI for the current year. But all of the source deductions that they owe since the beginning of the workers employment. In addition to that, business owners will also have to pay the employer portion of CPP and EI as well, dating back to the original date of employment.
The second thing that business owners should expect, is getting a penalty. This penalty is in interest charge on top of the entire amount that they owe. His can make an amount that is already difficult to pay even more difficult. But the penalty itself, is the steepest penalty that Canada revenue agency issues. It is at percent interest rate, and while many business owners will recognize that is being more stiff many high interest credit card rates, but business owners may not realize is that is an interest rate that is accrued on a daily basis. That can make this penalty even more difficult to pay, or downright impossible. With a thousand dollars that a business owner might owe increasing to twelve hundred dollars literally overnight.
With how difficult this penalty will be to pay, business owners need to understand that they should avoid this problem by ensuring that they are paying their source deductions accurately. Not just in the amount of source sections that they are paying, but also by paying on time, and ensuring that they are paying source deductions on all employees that require source deductions withheld from their paycheck.
Edmonton Bookkeeping | Knowing The Differences Between Employees And Contractors
The reason why business owners need to understand the difference between employees and contractors says Edmonton bookkeeping, is in the source that actions that an entrepreneur must withhold from them. While employees will have their source deductions withheld from their pay. Contractors do not. However, business owners might put themselves at risk if they hire a contractor so that they do not have to work outsourced that actions. And then later, CRA discovers that they should have been considered an employee. The penalty that they will be assessed with can be so difficult, that may financially group business to the point of having to shut down. Therefore, business owners should understand the difference between employees and contractors according to Canada revenue agency, they can avoid this mistake.
Ultimately, the difference between the two comes down to the level of control that an entrepreneur has over them, and the level of liability that they have. Edmonton bookkeeping says that employees will have little control, but also little liability. While contractors will have a lot of freedom, but a lot of liability. Therefore, when a business owner is hiring one of these workers, they should take the following questions into consideration.
Who is controlling the rate of pay says Edmonton bookkeeping, does the entrepreneur tell the worker how much they are going to get paid either an hourly rate or salary? Or does the worker tell the business owner how much a specific job is going to cost them. Also, does the business owner get to dictate the hours that they have to work, letting them know that they have to be at work at a set time, for certain number of hours, or they get to come and go whenever they want, as long as they get the work done by the deadline?
Also, business owners need to take into consideration who is responsible for the expenses, whether it is bills, materials and supplies? Or who owns the tools says Edmonton bookkeeping. By figuring out if the person that they hire has little control liability, that will make them an employee. Contractor on the other hand will have a lot of freedom, but they will have the liability, and even stand to either profit or lose money on their job. By taking these things into consideration can help business owner understand if they have an employee, and then they must withhold source inductions. Or if they have hired contractor, and they do not have to withhold the taxes.
Ultimately, business owners can not only make that determination, based on intent. But they can also create an employment contract that outlines the employment terms, so that if Canada revenue agency ever has a question, they can show them the contract. Also, Edmonton bookkeeping says that business owners can also ensure that all contractors that they hire are incorporated, and they will forever be exempt from any liability. When business owners understand the difference between employees and contractors, they can ensure that there hiring these workers correctly, and ensuring that they are paying taxes on them correctly as well.