Business owners need to be very careful about when they are hiring contractors for their business says Edmonton bookkeeping. While they may believe that the biggest difference between contractors and employees is that contractors do not have source deductions withheld from their pay. However, there are many other determining factors that Canada revenue agency uses to make that determination. Business owners need to ensure that they are adhering to those standards, so that if Canada revenue agency looks into it, a business owner can be confident that they adhered to those rules, and will be assessed penalties.
Ultimately, since business owners will not be remitting source deductions on behalf of a contractor, if the contractor ends up not remitting their own source of actions at tax time, Canada revenue agency may do in investigations is Edmonton bookkeeping. The will be looking into the employer as well as the contractor themselves, in order to determine if they should be considered an employee. If they do find that the contractor should have been considered an employee, the business owner will be responsible for paying all of the source deductions that should have been remitted, since the first day they were hired.
Canada revenue agency will typically issue a questionnaire for the contractor to fill out, in order to determine if they should be considered an employee or not. Canada revenue agency may also call the place of employment, to see if they can ask questions of other employees to make that determination. Ultimately, how much control a business owner has over that person, and if they have any risk associated with their job will be what Canada revenue agency is trying to find out.
Contractors will typically set their own prices for the job, and will be issuing a business owner and invoice. Also, Edmonton bookkeeping says that contractors will typically be able to come and go from the jobsite as the wish, be able to hire staff to help them with the job, by their own supplies and materials, dictate how the job gets done, and own their own tools. Ultimately, contractors have an element of risk associated with their job, and that will help Canada revenue agency agent from figuring out if the artifacts are contractor.
Employees on the other hand have a lot less control, having their wages dictated to them, be expected to show up to work at a set time and stay for set number of hours. They also do not shoulder any responsibility for paying bills, buying supplies or owning any tools. That works to having absolute no risk associated with employment. Edmonton bookkeeping says that business owners need to understand this when they are hiring employees and contractors, to ensure that there being very clear upon hiring them.
Business owners may choose to create an employment contract that can define the job, whether they are an employee or contractor. And business owners can also ask all contractors to be incorporated, as that will ultimately eliminate all speculation, and can help ensure that business owner is completely covered.
Edmonton Bookkeeping | Remitting Source Deductions Properly
Business owners need to be very careful that they are remitting the source deductions properly says Edmonton bookkeeping. Because if they do not, they can be assessed a huge penalty. The penalties for this are the largest that Canada revenue agency hands out because the hope that it will act as a deterrent. If business owners are afraid of getting assessed this penalty, they will ensure that they are remitting source deductions correctly and on time.
The penalties that business owners will face if they end up permitting source deductions wrong will be first of all to pay all of the deductions that should have been remitted in the first place. This means all of the employee income tax, CPP and EI must be remitted. As well, a business owner should understand that they also have to pay the employer portion of CPP and EI as well. Edmonton bookkeeping says that however much they owe, they will be expected to pay back but then there is also a penalty on top of that. This is a 20% penalty on the entire amount that is owed. But the most significant thing about this interest, is that it is accrued every day. Therefore, however much a business owner owes can be significantly increased every day, until they can pay that amount in full.
This can be extremely financially crippling to a business even if it is not an extremely large amount that they owe in the beginning, because it can end up amounting to a large sum, depending on when a business owner is able to pay the amount. With 50% of all entrepreneurs feeling in business, and 29% of those business owners failing because they ran out of money, by being assessed this penalty can significantly impact a business owner, and cause them to run out of money in their business. Therefore, this should be avoided will costs. His owners should ensure that not only are they remitting deductions correctly, but on time as well.
However, business owners may believe that they are calculating source deductions correctly, and remitting them on time. However, if they have a contractor that is working for them, but Canada revenue agency deems them as an employee, they could also find themselves being on the hook for all of the source that actions that should have been remitted on behalf of that contractor as well. This can end up equaling a significant amount, depending on how long that contractor has been working for the business owner. Therefore, business owners need to be very careful about who is considered an employee and who is considered a contractor.
Business owners may wish to create an employment contracts, and no matter if it is a contractor earned employee, outlined the terms of their employment very clearly. Therefore, if Canada revenue agency has any questions, it will be clearly defined in a contract. Also, business owners can completely eliminate this risk by asking their contractors to be incorporated, so that they can completely eliminate this risk.