Good morning and welcome to another episode of always up to date. Um, my name is Denise and this is YALI and we are the co-owners of always bookkeeping, which is an Edmonton based Edmonton Bookkeeping. Um, and today we are going to be talking about payroll tasks, tat tax risks. Sorry, sorry. Um, our quote today is from Zig Ziglar. Uh, when you stopped planning and preparing, you stop winning. Uh, and our statistic is from the Fraser Institute. Uh, the average Canadian pays 43% of income and taxes, uh, like the CPPI, GST, fuel tax, etc. And by comparison, on average, only 37% of the remaining income goes toward basic necessities like shelter and food and clothing. Um, so, you know, we, we have business owners that come in and they’re behind in remitting their payroll source deductions or, you know, some of them don’t realize that they have to submit it or when they have to submit it. And, um, so then, uh, they’re accruing penalties and interest from the CRA and eventually they’re going to trigger a payroll audit. And so, um, if you’ve ever had a payroll audit, you really don’t want to trigger a payroll. [inaudible]
so, um, yeah. So we have a few questions that we’re gonna um, just go over just to kind of help you to know, um, what some of the risks are about not paying your payroll taxes. Absolutely. So first one is what does the employer contribution of CPP and E I have seven point 37% mean yeah. So not only do you have to submit taxes for your employee, but you also have to submit taxes for, um, the employer part. So, and it, it works out to approximately approximately 7.4%, a 7.37, as we said. And so, um, you have your, the taxes, well, the employer doesn’t have to pay taxes, but they have to pay CPP and E and again, those two work out to about 7.4%. Okay. Yeah. So, um, besides employers, CPPM yai, what are the three components of CRA remittances? Yeah. So, um, what needs to be remitted to the CRA is the employee taxes, um, the employee CPP and then these employee EEI with Edmonton Bookkeeping.
Um, you also have to remit, um, employers, CPP, which is the same amount as the employee CPP and you have to pull, um, remit employer EEI, which is 1.4% of what your employee pays. So you have employee taxes, employee, employer, CPP, a employee, I and employer [inaudible]. Those are the things that have to be readmitted. When are most payroll remittances due to be submitted to CRA? Yeah, so, um, for most small businesses, it’s the 15th of the following month of when you paid the employees. So again, if you pay, say in may pay your employees in may, those source deductions are due by the 15th of June. Um, sometimes they’re, um, they have quarterly remittances and annual remittances. Um, those are more for people that are companies that have huge payrolls. And, um, again, I think we talked about this before in another video that um, the CRA will send you a letter letting you know when you can file quarterly.
Yeah. Um, but again, most most small businesses, it’s the, the month after you pay and payroll is based on cash. So it’s when you pay your employee, not the period that they worked for. Yeah, absolutely. Um, would you recommend waiting until the deadline to submit payroll or mentors? I like this. I wouldn’t remake it. Recommend it. I mean you can if you want to as long as it’s by the 15th of the following month. But why would you take that chance? Um, we recommend and what we do at, at always bookkeeping, um, is we will do it when we pay the employees. So we, um, if you pay your employees every two weeks, but you pay the employees and we submit the source deductions for that period and it’s, it’s, it’s very easy to kind of match them with the, what payroll and you’re related to as opposed to lumping them altogether and segmenting it with Edmonton Bookkeeping.
Um, that way you find out where the discrepancy is coming from or, um, if there’s any error maids, uh, made depending on, um, when CRA decided to post it. Um, as much as a CRA really wants to be accurate with these remittances, sometimes they do slip up on all work, which period it’s supposed to be at. So you just want to be careful and, um, and recording those and by biweekly submitting them with your payroll, you know exactly what the remittances are for and which payroll period therefore, so. Yep. And you also, like, you kind of get into the habit of it. Six, don’t forget, it’s easy to forget, you know, the 15th comes around and you know, you don’t have a payroll to do, so you don’t really think about the payroll source deductions, but if you do it when you’re doing payroll, you normally don’t forget, you just do it.
Yeah. Yeah. Um, what is the potential penalty for being just one day late on submitting remittances? Yeah, it can be 20% for day. You know, we, we look at credit cards that are 19%, but that’s over a whole year. This is for one day. It can be 20%. The, the CRA, um, looks pretty, um, they’re pretty tough about the not getting those, those payroll source deductions. Yeah, yeah. Again, this is, um, money that you would help from your, uh, employee’s paycheck. So it’s money that’s not really yours. And so that’s why they, um, they’re very strict on rooming those because they don’t want you to use that for your own business cashflow. Um, again, this is coming from your ma employee’s pocket. Only a portion of it is your, it’s a burden for her, for hiring employees, but most of it as what you’d take out from the employees base with Edmonton Bookkeeping.
So there, that’s why they are very strict about it. Um, how does CRA find out that you’re behind on your payroll tax when you file your chief? [inaudible]. So, um, let’s see. Ernie finds out that you’re behind once you file your T four. So, um, T fours are due in February either February 28th or 29th, depending on if there’s a leak here or not. But the majority of the time it’s due on February 28th when you file that, the CRA matches that, what you filed to what you’ve actually paid. So then they can tell that if you, um, you know, if you’re up to date on your, um, source deductions and then you’ve, you’ve done all your, your filing correctly or if you’re behind or if you haven’t paid for whatever reason, um, and the CRA will send you a letter asking for you to explain the discrepancy.
Yeah, yeah. If you can explain it or whatever, then a payroll audit is triggered and there is some items that you want to take a look up to to make sure that you’re filing is correct. Cause there, um, most of the time when you fight, when you fall, your chief fours or your accountant or your bookkeeper does that you forced if it’s accurate, if it’s accurately, accurately done. Then there is a, you should have two kinds of slips. So there should be chief for summary. And then you should have the two four slips, which is the ones that you gave to you give to your employee and chief for summary slips, summarize everything that you have or that you would help for the CPP EEI portion. And at the bottom you will see a little box called the difference. So that right there will tell you there is a difference between how much you remitted on your records, um, compared to what you should have remitted from what you would help from your employees, paychecks.
So that’s another thing to look at. If there is a difference there, you want to look at that before you can even file it to, to CRA. Yeah. Um, our director’s purse or sorry, how aggressive is CRD in collecting remittances compared to other balances? Yeah, the CRA is pretty aggressive in collecting this again, um, payroll taxes, the, the source deductions that you have to um, submit to the CRA. Um, they consider them trust funds, trust monies, and so they don’t belong to you. They belong to the CRA on behalf of your, your employees. You’re emitting them on behalf of your employees. So the CRA is pretty aggressive. Um, you know, if you don’t pay your, your corporate taxes on time or your GST, they’re a little bit more lenient about those ones. But, um, payroll tax, they, they really do keep an eye on that too and make sure that you’re doing what you’re supposed to be doing with those Edmonton Bookkeeping.
Um, our directors personally liable for a payroll tax. Yeah, absolutely they are. If you’re not paying those and you don’t have the money in your corporation to pay your source deductions, um, CRA will consider the director liable for that. You’re a personal guarantor for being a director. Yeah. Yeah. Um, why is it advisable to have only one spouse as a director in a risky business? Yeah. So, um, in a risk your business, it’s advisable totally have one spouse because the CRA can only come after the director. So, um, they can’t come after the director’s spouse to get those payroll taxes. So, um, you know, if you and your spouse own a house and the spouse is a director of a business and the CRA comes after them for payroll deductions, um, they can only take half of that house. Like they can’t take the full amount that’s that you have in that house with Edmonton Bookkeeping.
They can or your savings accounts are like, they can’t touch anything that is the spouses owning the director. Yeah, absolutely. And taxes aside, it’s, it’s, it’s recommendable just to have only one director just for that portion of the liability. Yeah. And also that there should be one decision maker. Um, it is very, very counter productive who, and um, business owners are indecisive. So having one director just kind of makes it sure that you have one decision maker that if, if you, you both are not deciding on something and one of them can override. So yeah, that’s right. Yeah. Now good for personal relationship sometimes, but it’s better to have a bad decision than the decision of them. That’s right. Um, how can effective tax planning help eliminate a rear spiral tax? Yeah, so just, um, again, planning to, to make sure that you are paying your taxes on time, your, um, payroll taxes, making sure you have that money in the bank.
Often when we’re working with clients, we try to make sure that they have a buffer of whatever their payroll is going to be. I mean you want to be able to pay your employees so that you have people that work at your business. So you continue making money, but you also want to plan to have that money that’s there to cover your payroll taxes. Yeah, absolutely. And this is specially important for small business owners that are, they’re the only employees or just them the owners. Um, if you are deciding to put yourself through salary, you’ve got to make sure that you have those remittances that um, you have to, sorry, those payroll tax deductions that you have to remit at the end of the year, even if it’s an annual basis. Um, because you don’t want to be stuck with that bill at the end of the year if you know that you’re going to pay yourself salary without Edmonton Bookkeeping.
So it’s a very good idea to have tax planning. And again, even if you’re admitting it for yourself, um, it’s not a bad thing that it’s coming out of your, um, your cashflow. Cause at the end of the year, if you decided that your only, um, declaring yourself a little dividend, this is still, um, payroll source deductions or income tax deducted that you can use on your personal atoxics when you file your personal taxes in April or June 15th. Yeah. Yeah. So I think that’s all the questions we have for today. Um, I hope you guys find it informative. If you have any ideas on what you guys want us to talk about regarding Edmonton bookkeeping, let us know in the comments down below. Um, please like and subscribe to our videos if you like them. And we’ll see you guys next time on our next episode of always uptick.