Business owners should understand that the failure rate for entrepreneurs in Canada is very high says Edmonton bookkeeping unfortunately, half of all businesses will have close their doors before being in business for five years. 29% of these failed entrepreneurs will say that the reason why their business failed was because they ran out of money. One way that entrepreneurs can put their business at risk of running out of money, is by incurring penalties from Canada revenue agency. Therefore, entrepreneurs need to learn not only how to remit source deductions correctly, in order to avoid costing their business penalties.
When it comes to payroll deductions, this is calculated on a slip called a T4 says Edmonton bookkeeping. This is where all of the source deductions that should have been withheld from all salaried employees checks are noted. If an entrepreneur has paid themselves salary, they also need to ensure that they have remitted payroll deductions as well. This means not only CPP, EI but also income taxes as well. Business owners also need to take into consideration that in their source deductions, needs to be the amount of CPP and EI that they need to remit on behalf of the business.
T fours need to be filed by the last day of February every year. Edmonton bookkeeping says that not only is this important so that Canada revenue agency can calculate how much source deductions an entrepreneur should have remitted, so that they can compare it against how much they actually have. But also because employees need this information in order to file their personal taxes. Therefore, there is a penalty that business owners can face if they do not get their T fours filed on time. This penalty is a specific dollar amount per employee, depending on how many employees they have and they get that charged to them every day that they have not filed. If they have a lot of employees, or if they have filed quite late, this can add up very quickly says Edmonton bookkeeping.
Many entrepreneurs wonder how Canada revenue agency knows if they have paid enough source deductions. Edmonton bookkeeping says that once an entrepreneur files there T4, they will be able to see how much source that actions they should have paid, and will compare it against the source that actions that an entrepreneur has remitted. If they have underpaid, this will trigger penalties and potential payroll audits. Therefore, it is important that entrepreneurs actually look at the source that actions they should have paid prior to filing their T4 slips. If they have accidentally underpaid, they should send an additional payment off to Canada revenue agency right to completing their T4 filing to avoid penalties and audits.
Even though avoiding a payroll audit can be very easy, missing a deadline can also be easy says Edmonton bookkeeping. Therefore, entrepreneurs need to learn early on in their business what the deadlines are, and how to avoid triggering a payroll audit to ensure they never have to go through that experience in their business.
Edmonton Bookkeeping | Paying Source Deductions Properly Can Help Avoid Penalties
Business owners should ensure that they are aware of not only how to calculate source deductions, but how to remit them to CRA on time says Edmonton bookkeeping. The reason why, is because if they make errors doing this, not only could the potentially face being assessed penalties that could be very difficult to pay, putting their business at risk. And also, they could trigger a payroll audit, that could be not only time-consuming, but devastating to their business as well.
The first thing that entrepreneurs should know, is that there is two things that they can do to avoid triggering a payroll audit. They can pay the correct amount, and they can avoid paying late. In order for entrepreneurs to avoid paying late says Edmonton bookkeeping, they need to know when the deadline to submit payroll remittances to Canada revenue agency is. While the fifteenth of the month in the month following pay date is the deadline, the recommendation is for entrepreneurs to not wait until that day to pay their source deductions. If something goes wrong during payment, Canada revenue agency might not get the payment on time, and trigger a penalty even though an entrepreneur was trying to paid on time.
One of the best practices that entrepreneurs can get into the house of early on in their business says Edmonton bookkeeping is submitting payroll remittances on the same day that they run payroll. This is great for several reasons: by not forcing an entrepreneur to calculate the source deductions twice and saving time, and by ensuring that an entrepreneur will never pay source deductions late if they pay it the same day they run payroll. Since remittances are only do after an entrepreneur runs payroll, if they get the habit of doing it at the same time they know they will never be late.
The second thing that an entrepreneur can do to ensure that they are avoiding a payroll audit is to pay the correct amount. This means calculating the correct amount of source deductions prior to sending them off to Canada revenue agency. Edmonton bookkeeping says that if entrepreneurs are overwhelmed trying to do this using their payroll or accounting software, there are options. Canada revenue agency has a program on their website that entrepreneurs can put the payroll amount into, and get how much source deductions they should withhold from their staff. By utilizing this, entrepreneurs can verify that they are remitting the correct amount every time.
By learning the two things that entrepreneurs can do to avoid incurring a payroll audit in their business, Edmonton bookkeeping says that business owners can run their payroll confidently. The sooner that a business owner learns these tips, the higher chance the will have it not incurring crippling penalties that could put their business at risk. Therefore, all entrepreneurs who are in business and are running payroll should learn this information as soon as possible.