Business owners should be aware of the differences between employees and contractors even before they have the needs to hire any staff in their business says Edmonton bookkeeping. The reason why, is because employees must have source deductions withheld from their paycheck will contractors do not. However, if business owners get this wrong, and do not withhold the right source deductions, Canada revenue agency may investigate, and if their investigation results in them determining that a contractor that they hired should have been considered an employee, they will assess the business owner to pay a significant penalty.
In fact, Edmonton bookkeeping says that the penalty that entrepreneurs will pay, will be the steepest penalty that Canada revenue agency issues. The reason why, is because CRA views source deductions payments as government money being held in trust. If a business owner does not pay the correct amount of source deductions, does not pay them on time, or does not pay that all, they view that as a business owner using government money to fund their private corporation. That is a very serious events, which is why has the steepest penalty. Edmonton bookkeeping says the goal is to ensure that business owners are afraid of the penalties much, that they avoid making mistakes.
The penalty that business owners can look forward to include paying all of the source deductions for that worker, dating back to the first day they started working for the business owner. That means that if a business owner has hired this person for more than a year, it is not just the current year that they have to pay the source deductions for. That means all CPP and EI on behalf of the employee. Also that means all CPP and EI on the half of the employer as well.
In addition to having to pay the entire amount owed, dating back to the first day that they started work. Edmonton bookkeeping says that a business owner will also be assessed at a 20% interest penalty. And while 20% seems awful high, it is higher than a high interest credit card, it is going to accrue at 20% on the total amount per day. This is definitely higher than a high interest credit card, and it can be exceptionally hard for any business to dig themselves out from. Therefore, in order to avoid accruing this type of penalty, business owners need to simply sure that they are not making this mistake beginning.
Business owners might be confused as to the difference between employees and contractors, that once they learned this, they can ensure that employees are getting source that actions held from their paychecks, and that a business owner is remitting them on time every month. Learn how to do this properly needs that business owners can ensure that they do not get assessed with penalties that could be financially crippling for their business to have to be expected to pay.
Edmonton Bookkeeping | Learning How Employees And Contractors Get Paid
When business owners are hiring workers for their businesses Edmonton bookkeeping, they typically have the choice hire employees or contractors. While the choice might look very attractive to hire a contractor, because they do not have source deductions withheld from their paycheck. That is not how a business owner should be making the decision. They should take a look at the role of a contractor and an employee, the determine which is the best fit for their business, and then be very clear when they hire them what their role is. It can even create an employment contract that outlines all of the specifications.
When thinking of the difference between employees and contractors, Edmonton bookkeeping says that business owners should consider the level of control that they wish to have over that person. For example, if a business owner is going to dictate the wage that they hire the worker for, as well as dictating their hours, and the specific duties that they will be responsible for, and how they do them that is more likely to be considered an employee says Edmonton bookkeeping. However, the benefit to that will be that an employee does shoulder any the liability, and they will never risk running a loss.
Contractors on the other hand have a significant amount of freedom. They tell the business owner how much it is going to cost them to get the work done, and as long as they meet that deadline, they are able to come and go on the jobsite as they wish. Also, contractors will be able to hire their own staff, by their own supplies and materials, pay their own bills, and own their own tools. Because of that, they have the ability to either profit or have a loss on a job.
When a business owner can factor in the differences between the two, and decide which one suits their needs best, they can draft up an employment contract that specifies everything that a business owner will require, so that an entrepreneur can ensure that the contractor get source deductions withheld or not. Edmonton bookkeeping says that this is very important, since if they hire a contractor, who does not pay source deductions themselves to Canada revenue agency, that can trigger an investigation.
By always adhering to the definitions of employee or contractor, can ensure that business owners are always hiring the right person for their business, and paying Canada revenue agency correctly. Business owners should take into consideration that creating an employment contract is a very powerful tool to ensure that no matter what happens with the worker, if Canada revenue agency investigates, a business owner will have their bases covered. However, business owners also might want to take into consideration that when they are hiring contractors, they may simply say contractors who are not incorporated will be hired. By saying this, will ensure that business owners will never be held responsible for their contractor not paying their source deductions directly to CRA.