It is extremely important that entrepreneurs understand how to pay the source deductions to the CRA on a regular basis says Edmonton bookkeeping. The penalties that an entrepreneur can to get assessed simply by remitting late can end up being extremely difficult for an entrepreneur to pay. Therefore, no only does an entrepreneur need to understand how much source deductions to deduct, and submit to CRA, they also need to understand when it needs to get there, so they can avoid being late.
Many entrepreneurs are unaware of what the penalty is for being even one day late and submitting their payroll remittances. However, one day late will get a 20% interest charge per day. This is extremely high, in fact, one of the highest penalties from the Canada revenue agency. The reason it so high, is because they view the money as being held in trust, therefore it is not the business owner’s funds.
Once an entrepreneur is aware of what the penalty is for being late, the next thing they should understand is when the deadline is so they will not be late. While the deadline is the fifteenth of every month, in the month following when payroll was, Edmonton bookkeeping recommends entrepreneurs do not wait until the fifteenth to remit payment to CRA. That is leaving too many things to chances, and if an entrepreneur waits until the fifteenth, and something goes wrong, it will be hit with that 20% interest charge that can be very difficult to dig themselves out of.
The recommendation from Edmonton bookkeeping is for entrepreneurs to remit payment at the exact same time that they are working on payroll. Not only does this make it easy to remember, because entrepreneur is already working on payroll, but it also ensures that if there was an error electronically, or if CRA received it late, an entrepreneur is not going to be hit with a penalty.
In order for an entrepreneur to ensure that they are remitting payroll correctly, they should know and how much payroll taxes they need to withhold from their employees, how much they need to withhold from their check if they are paying themselves a salary, and also they have to ensure that they are paying an employer contribution as well. Therefore, there are five parts to payroll that an entrepreneur must be remitted. The employee and employer CPP, the employee and employer EI, and the EI is going to be 1.4% than the employee portion, as well as income tax.
When a business owner is learning how to remit payroll taxes properly, they should ensure that they are collecting the correct amount, and they are remitting it on time. Once they are able to remove these things, they will be able to remit payroll tax regularly without issue. This can help entrepreneurs avoid the high penalty from CRA being late, and can ensure that the never run into any problems due to improper payroll remittances.
Edmonton Bookkeeping | Payroll Tax Risks
While a business owner should avoid being late remitting any taxes to Canada revenue agency says Edmonton bookkeeping, the highest penalties that are not working get stem from being late on their source deductions that they send to Canada revenue agency. There are several ways that entrepreneurs can learn to remit timely, and accurately so that they can avoid putting this financial stress on their business.
Many entrepreneurs are not even sure how Canada revenue agency even knows that they are behind on their payroll taxes. However, Edmonton bookkeeping says that a soon as an entrepreneur files their T fours, CRA will be able to easily see how much they should have remitted and compared against how much and entrepreneur actually has. Since the T4s are due on the last day of February, once an entrepreneur has finished them, Canada revenue agency will be able to tell. Chances are, that an entrepreneur is going to receive a letter from Canada revenue agency asking them to explain why there is a discrepancy. If an entrepreneur is unable to explain it, this will trigger a payroll audit.
Not only are entrepreneurs hit with an extremely high penalty for being even one day late, Edmonton bookkeeping says can revenue agencyís also extremely aggressive in collecting remittances especially when compared to other balances. The reason why, is because CRA considers the money that an entrepreneur has withheld from their employee’s checks as a trust fund, and not the business owners money. Therefore, they do not look too kindly upon businesses that withhold the funds, but then do not remit them timely.
Another thing for entrepreneurs to keep in mind is directors are personally liable for payroll tax. Every single director, whether they were responsible or not for running payroll are personally liable for all payroll tax. This is the reason why Edmonton bookkeeping recommends that entrepreneurs do not have their spouse as a director in their business especially if it is a risky business. That way, if they are ever late and remitting payroll tax, not having both people being directors of the business can protect their assets including their house and their savings account. This way, it limits the liability the directors have in case something goes wrong.
The good news in all of this, is effective tax planning can help eliminate payroll tax arrears. If an entrepreneur creates a plan on how they are going to do to ensure that they are withholding and remitting payroll taxes on time, it can significantly help. Edmonton bookkeeping recommends an entrepreneur having a buffer in their accountant so that even if there having a difficult time financially, they will have the money set aside to pay payroll tax. This is especially important for an entrepreneur that is the sole employee of the corporation and they pay themselves a salary to avoid being hit with a huge remittance at the end of the year.
When entrepreneurs understand how to manage their payroll remittances, not only can they avoid penalties, but they can also ensure that they are creating plans to keep payroll remittances happening on time, and that they have the money saved up in case something goes wrong. By doing this, entrepreneurs can avoid payroll tax risks.