Many business owners are not aware of problems that are associated with hiring a contractor that should have been hired as an employee says Edmonton bookkeeping. But ultimately, contractors do not have source deductions being withheld from their pay, and if they should have been determined an employee, that means the business owner had not been properly withholding and remitting source inductions on their behalf. If they are assessed by Canada revenue agency as not paying their source deductions correctly, business owners can face very stiff penalties. Therefore it is very important that entrepreneurs learn how to tell the difference, so that they can avoid making that mistake in their business.
Business owners have many questions associated with this, that can help them learn the difference to avoid this mistake. The first question is how does the degree of control determine who is an employee and who is a contractor? Edmonton bookkeeping says that ultimately this comes down to how much control the business owner has over that person. Employees do not set their own wages, they have a set schedule, and they do not have to pay any of their own expenses, by their own supplies and materials and do not own their own equipment. Because of all of this, they do not have the ability to lose money.
Contractors on the other hand have a lot more freedom, may dictating to the business owner how much they are going to charge for the job, they buy their own materials, own their own tools and by their own supplies as well as are able to come ago from the jobsite whenever they want says Edmonton bookkeeping.
The first questions after that that business owners as says Edmonton keeping is if the business owner pays for the tools and equipment, will this person still be able to be considered a contractor? It ends up being a question that depends on a number of factors, because Canada revenue agency will make the determination using a questionnaire that has over fifty questions on it. They are going to look at the overall picture. They may not own their own tools and equipment, but if they invoice the business owner, have a number of clients that they can do work for the same time, are able to come ago from the jobsite as they choose, Canada revenue agency might deem them as a contractor.
Because not a clear cut answer if a person is a contractor or not, business owners should be very clear and they are hiring them, and can use tools like an employment contract, or asking all contractors to be incorporated before they will be hired to ensure that intent is clear, and a business owner has proof that they can submit to Canada revenue agency if there are any questions. By doing this, business owners can eliminate the risk associated with having a contractor be deemed an employee. Therefore, they can avoid having to pay penalties associated with this.
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Since the penalties that are associated with incorrectly remitting source deductions is so high says Edmonton bookkeeping, business owners should learn how to avoid this problem. Ultimately, business owners need to understand that all employees should have source deductions withheld from their pay and remitted to Canada revenue agency by the fifteenth of the following month. However, the problem typically comes in if a business owner has hired a contractor. If Canada revenue agency deems that contractor should be considered an employee, and a business owner has not been remitting source deductions they could incur significant penalties in their business.
One of the first questions that business owners have that can help them understand is how can financial risk determine if a person that is hired is considered a contractor? Ultimately, when a worker has any sort of financial risk associated with their job, that is going to be taken into consideration by Canada revenue agency. Since employees should never shoulder any financial risk associated with being employed, workers that do have a financial risk are more likely to be considered contractors the Canada revenue agency. Therefore, if the contractor does things like their own bills, they have several customers, they set their own price and there able to hire their own employees, there are more likely to be considered contractors says Edmonton bookkeeping.
Another question that business owners often have according to Edmonton bookkeeping is: what happens if the worker hires an assistant? The ability to hire an assistant, or hire employees at all to help with the job shows I Canada revenue agency that the worker has significant control over how they get the job done, making them more likely to be considered contractors by Canada revenue agency.
Another question that business owners often have is: what happens when a business owner gets a CPP/EI ruling? Ultimately, if they are investigated for paying a employee like a contractor, is that Canada revenue agency will hand them that ruling, and will require the business owner to pay all of the CPP and EI that has been owed since the day that contractor was hired. This means not just the employee portion, but the employer portion as well. And one thing that business owners need to keep in mind, that even though they had not withheld those source deductions from that person’s pay it is not the person’s responsibility to pay, even though they still receive their full pay.
In addition to that, business owners will also be hit with a 20% interest rate on the entire amount that they owe which is accrued on a daily basis. That means, if a business owner owes anything, they need to pay that very quickly to avoid having that amount that they owe blue quite quickly.
Business owners can understand the difference between employees and contractors, they can avoid making that mistake in their business. If they have got a contractor or employee. If they have already made that mistake, they can simply ask contractors to get incorporated, or start taking source deductions off their pay, and eliminating the risk.