Good morning and welcome to another episode of always up to date. I’m Denise and this is [inaudible] and we are co-owners of always bookkeeping. How are you doing today? EOE? It’s raining outside that Hey, yeah. [inaudible] better than snow, right? Yeah. Um, so today we’re going to be talking about [inaudible] and [inaudible]. Um, our quote for today is from Michael Gerber who is the author of the E-Myth. Um, so the fetal assumption is if you understand the technical work of a business, you understand a business that does that technical work. Uh, so basically that means, you know, just because you are a contractor does it mean you know how to run a contracting business with Edmonton Bookkeeping. You know, if you might be a dentist, doesn’t necessarily mean you know the technicalities of running an actual dentist practice. Um, so that’s kind of where the S the, that fatal assumption might come in. Um, and you can get yourself into trouble.
Um, our statistic is kind of one of our favorite statistics that kind of keeps us going and makes us want to help small businesses to grow. And, um, the statistic is that 50% of all businesses are out of business in five years and 29% of these failed because they, uh, failed businesses will site that they ran out of cash. Um, so again, like I said, that’s kind of why we do what we do. We want to try to help these small businesses specifically to, uh, to stay in business. So they’re not part of that 50% statistic yet with top Edmonton Bookkeeping. Um, so, you know, lots of times we have business owners that, um, they haven’t filed T fours and T fives, um, or they haven’t filed them properly and that triggers an, uh, a payroll audit for them. And so once a payroll audit is triggered, then CRA is gonna start scrutinizing the rest of your, your records.
So we want to try to avoid that. So, um, y’all way, there’s a few questions that, um, we just want to answer so that people kind of know a little bit more of about filing their T fours and T fives for sure. Uh, first question you want to ask yourself, uh, generally what amounts need to be recorded on [inaudible]? Yeah. Good question. Uh, so the difference between, um, well on the T fours and [inaudible] is that chief Wars or your payroll deductions. So, um, your taxes, your CPP, your EEI for your salary, your salary, yeah. For yourself. And for any employees that you have a [inaudible] that’s going to record any dividends and get great Edmonton Bookkeeping. So money that you’ve taken out of the corporation but isn’t considered, um, your salary. Um, what is the difference between T four S and T five? Yeah, so we kind of discussed that above the, the T fours are, um, the, so anything that you’re taking as a salary that you’re giving to employees as a salary, um, again, they have to have, um, source deductions on it.
So your taxes that you’re taking off your CPP and your EEI, not only for, um, your employees, but for yourself as a, for your company. So the company has to pay those, uh, the EEI in the CPP as well. Um, so we’ll say something about that. Um, for T four 60 fives, there are two things that you want to think about when it’s a, or how it’s affecting your reports. T fours. Um, again, there’s high calories so they are decreasing your net profit for the year. Um, just some consideration as well when, uh, when you use your reports for something other than your corporate taxes, for example, if you decide to pay yourself through salary, which you will, uh, eventually issue a T four, four, that means your net profit is going down. And if you are, I’m trying to apply for a financing or a loan or something like that, that would no, I, that they would need your net income or your income statement.
That could be a negative impact on your income statement as opposed to a T five where it is coming out directly from your retained earnings. So basically the, um, the function where you take out your money out of your corporation can be either way, depending on what you declared at the end of the year. It’s a matter of tax planning that would make you decide which one is better for your household specifically because not every two, four, 95, a mix would be applicable for every personal household or, um, or any personal tax. Yeah. Right. And, and sort of, um, so just follow up with what you said too. So T four show up on your income statement without Edmonton Bookkeeping. So the, um, the salaries are going to show up as an expense on your, on your income statement. TFIs which are dividends aren’t gonna show up on your balance sheet. Exactly.
So that’s kind of where you would see those in your reports. Um, and this one would be taken out of your retained earnings. So your statement of retained earnings or statement of deficit will be the one that would be affected by your dividends, right? Yeah. Yeah. Good. Keep, so the next question is when do these D for ed D five slip slips need to be filed? Yeah. So even though they’re different, they have different information on them. Um, they’re found in different places of your, your statements. They have to be filed at the same time. So they all, they, they’re all due by the end of February. So February 28th or February 29th, depending if it’s a leap year, um, that’s when they have to be filed with the CRA. Um, are there any source deductions? Are payroll remittances for T fives? No. T fives don’t have any, um, deductions, source deductions or payroll remittances.
Um, so you can declare them at the year end, whatever. And there’s no issue with having to pay the tax, um, on a regular basis like you do with the T fours. Yeah. Um, one major tip that we normally go our clients is when you take out money through your corporation, does it matter if you think you’re paying yourself salary or dividends? Um, if you are issuing a check, please don’t put salary on your memo on D check just it because it limits of what your accountant will do at the end of the year when they try and, um, kind of figure out what makes it necessary for your household. And again, it’s very common, um, practice to just declare a salary because it’s the easiest way to, um, to declare something that was thrown out at the corporation. It also, um, it looks like you are going to be paying taxes lower on the corporate side, but sometimes it doesn’t actually take into consideration how much tax you’ll be paying personally.
So, um, it’s just one of those things that you want to figure out and you want your accountant to have a little bit of flexibility on. So don’t put anything on your check if you need to withdraw money, just what’s your holder job? Yeah, good point. Um, what are the deadlines to submit payroll, remittances? CRA? 44 amounts. Yeah, so I’m submitting the payroll remittances for CRM to CRA. Um, the majority of small businesses that have to pay source deductions, especially if you have employees that use great Edmonton Bookkeeping. Um, it’s the, the 15th of the month following the pay date. So if you’re, if you pay your employees in January, then the payroll deductions are due the 15th of February and the payroll is, um, based on a cash basis, not so if the, um, pay period was in December, but the employees got paid in January, CRA considers that January timeframe. And so then it has to be done in February.
Um, yeah, so, so they have to be done by the 15th of the following month. There are some quarterly and annual reminders, um, but they’re very, um, uh, they’re not very frequent. And I, I find that it, it depends on how much your money every month and you’ll be approved for the quarterly first. Um, and you’ll get a letter from CRA, uh, letting you know if you’re eligible, but for the annual rumors, uh, usually it’s the ones that are just the owners as employees. Right. So, yeah. Yeah. That’s something to think about as well. And just a small businesses, the majority, it’s going to be monthly. Yeah. Yeah. And, and you do it monthly, you’re not going to be wrong. Yeah. You do it quarterly and you’re supposed to do it monthly, then you’re in trouble. Yeah. Um, upon filing your two fours, how does CRA know if you’ve paid enough source deductions?
Yeah. So when you file your T fours in February, um, that’s when the CRA takes a look at, um, what you file and what you’ve actually paid. And so they’re gonna know whether or not you’ve paid enough source deductions. That’s how they’re going to figure it out. Yeah. Um, yeah, it has to match your remittance. Um, if it doesn’t, you’re going to get a letter from CRA, CRA asking for the discrepancy. Yeah, let’s write description. Yeah. So, um, before you filed that T four, make sure you locate that discrepancy or you pay the difference in between. Yeah. Um, if CRA has concerns with these amounts, what sorts of audit will be triggered? Oh, I guess [inaudible]. Yeah. [inaudible]. Okay, so it’s going to trigger a payroll audit with the best Edmonton Bookkeeping. Yeah. Um, yeah. And so like you always said, they’ll send you a letter first asking for this discrepancy. Um, so you send that information if they’re okay with that too, like if you can explain that discrepancy or if you’ve paid the difference, um, then you should be okay.
If not, then you’re going to get a payroll audit to him. That’s a lot more, um, involved. Um, they’re going to ask you probably for your, um, paystubs for [inaudible] records, which show what source deductions you should’ve taken off. They’re going to ask you for bank statements. Um, they’re going to scrutinize those bank statements and, and see what’s happening with that money. They want to find out what happened to that money. Basically they, um, they consider it trust funds or trust money, so it doesn’t really belong to you with Edmonton Bookkeeping. So they want that money. Yeah, absolutely. It’s money taken out of your employees being check they you would held. So it’s, it’s, it’s basically you, um, holding onto that money until you’re admitted to the CRA. Yeah. So same thing with GST. So that’s why GSC and payroll are usually, um, penalize a little differently than the other taxes.
Corporate tax. Yeah, exactly. Exactly. Um, what are the two main functions that will happen in a payroll audit? Yeah. So in a payroll audit, um, they’re going to look at your bank statements and scrutinize those bank statements and find out where that money went, what happened, like, why aren’t you paying mad? And they’re also gonna start looking at your, um, your other expenditures and find out like your personal expenses, how much was going to yourself and um, yeah, just finding out again why you haven’t paid those source deductions with top Edmonton Bookkeeping. Um, what are the two main things you can do to avoid a payroll audit? Yeah, so of course the first thing don’t pay late up there. Then your source deductions. And the other thing that you can do is make sure you pay the right amount of source deductions. Um, you know, it’s, it’s very easy to keep track.
The CRA has a program that you can use to, you put in the amount that you’re paying your employee and it shows you how much you can, yeah. You have to do that. And um, uh, whatever software you use for your payroll should do it as well. I know QuickBooks does it. Um, it tells you exactly how much you need to be paying. Um, just a, another tip. So you have to pay the employees taxes, you have to pay their CPP, plus you have to play pay employers eat CPP and then that matches that use Edmonton Bookkeeping. And then you have to play, pay the employee EEI and you have to pay the employer EEI, which is, um, 1.4 times the amount. So I’m a little bit more than what the employee pays. Yeah. So sorry. You, you just have to be careful as well. Would your TD ones?
Um, I have, I’ve been to a lot of employers who doesn’t actually give you the TD one form and normally they just assumed that you’re, they’re your only employer for people have two jobs. It’s very important that you have your TD one because those two employers will be sharing the credits that you report on there. So you want to make sure that you only reported on one side with Edmonton Bookkeeping. Um, and this is on the employees side and uh, for the employer to know as well that those TD ones are really what, uh, they used to calculate how much credits they have to remove at the end of the year and how much tax from that will have to be deducted from the employee’s paycheck. Yeah. And sometimes on those two, sometimes your employees want to take off a bit more tax so that they’re not paying at the end of the year when, when they do their personal taxes.
Yeah, absolutely. Yeah. Um, why should you assess personal benefits prior to a payroll audit? Yeah, so when you get a payroll audit, that’s what the CRA is going to look at. They’re gonna look at your personal assets, uh, or story, your, um, personal benefits. Um, and again, just make sure that you’re not taking that money that really belongs to the CRA, and that was, um, supposed to be paid on behalf of your employees. Yeah. So I think that’s all the questions we have today. Um, I hope you find it informative and, um, if you have any questions or ideas that you want us to talk about regarding Edmonton bookkeeping, let us know in the comments below and please like and subscribe on our page and we’ll see you guys next time on our next episode of always up to date.