Not only can going through payroll audit be time-consuming and disruptive to a business says Edmonton bookkeeping. But also, it can be accompanied by stiff fines and penalties that could be difficult for entrepreneurs to pay. In fact, 50% of all businesses in Canada will fail by year five. 29% of these failed businesses say that the reason why they failed is because they ran out of money in their business. Therefore, helping entrepreneurs avoid paying penalties unnecessarily can help business owners stay financially viable for longer.
There are several ways that entrepreneurs can have payroll audits triggered in their business. One of the first things that entrepreneurs should be aware of, is filing their T4 and T5 slips on time is important. T5 slips are for entrepreneurs to keep track of all of the dividends that shareholders have taken in their business. And T fours are for keeping track of all of payroll deductions. Therefore, if an entrepreneur does not file these on time, not only can their employees not get their T4 in order to do their personal taxes. But Canada revenue agency also does not know if an entrepreneur has paid enough source that actions or not.
Business owners should understand that the filing deadline for T4 and T fives is the last day in February. Edmonton bookkeeping says that by not filing on time, entrepreneurs will trigger a penalty that compounds for every day that they do not file these important documents.
The next way that entrepreneurs can avoid triggering a payroll audit in their business, is to ensure that they are paying their remittances on time. Even though the deadline to submit they will remittances is the fifteenth of every month, Edmonton bookkeeping recommends business owners simply send them in the same day that they run payroll, and never risk being late ever again.
Finally, entrepreneurs can ensure that if they pay the correct amount, they can avoid triggering a payroll audit says Edmonton bookkeeping. This means not just salaried staff get CPP, EI and income taxes withheld from their paychecks, but business owners that takes salary also need to withhold these from their own paychecks. Also, entrepreneurs need to understand that as an employer, they also owe CPP and EI on behalf of the business. However, if entrepreneurs still struggle with this calculation, there are tools and resources at their disposal to help them. the first thing that entrepreneurs can do, is simply ask their Edmonton bookkeeping company. Or, they can also use any table or accounting software such as QuickBooks, QuickBooks online, Sage or zero to calculate the amounts. There is even a calculator on the Canada revenue agency website that entrepreneurs can put payroll information into and get the accurate source deductions amount.
However, this does not take into consideration the human error that could happen, which would end up with an entrepreneur having the incorrect amount of source deductions paid at the end of the year. Edmonton bookkeeping says that entrepreneurs should understand that they can simply review their T4 slips prior to completely filing them with Canada revenue agency. If they look and see that they have not paid enough source deductions, they can simply make another payments to Canada revenue agency prior to completing the T4 filing and avoid triggering a payroll audit this way.
Edmonton Bookkeeping | Understanding How To Avoid Triggering Payroll Audits
It is very important for entrepreneurs to understand all of the ways that they can avoid triggering a payroll audit in their business says Edmonton bookkeeping. It is difficult enough to operate a business as an entrepreneur, there are many reasons why entrepreneurs end up failing, they either are unable to find a market for their product, they cannot find the right team, or they run out of money. Being assessed a payroll audit, or incurring penalties due to incorrectly pay source deductions can be financially devastating for many entrepreneurs. Therefore, it is a paramount importance that entrepreneurs learn what they need to do to avoid this scenario themselves.
However, even the best intentioned entrepreneurs may find themselves being assessed a payroll audit. If they find themselves in a situation this is what they can expect says Edmonton bookkeeping. If they have submitted the incorrect amount of source deductions by the end of the year, Canada revenue agency may simply send them a letter asking them to explain why there is a discrepancy.
If an entrepreneur gets this letter, there is two options that they can go with. Number one, they can write a letter back to CRA and explain why there is a discrepancy. However, Edmonton bookkeeping says that if entrepreneurs Canada revenue agency is not satisfied with the explanation, it will trigger a payroll audit. A better plan of action would be for entrepreneurs who have been sent this letter, to simply pay the amount that they owe, and send back a letter explaining that they will pay it immediately. They may end up triggering a penalty, but this should help them ensure that they do not trigger an audit.
If they have triggered an audit, then Canada revenue agency will assign a business and auditor, who is going to request the entrepreneur sends them pay stubs, bank statements and PD seven eighty reports, that will show what source deductions should have been paid. In addition to being time-consuming and disruptive, payroll audits might require an entrepreneur to contact their Edmonton bookkeeping company for forms, or contact their accountant, which will have a cost associated with it. Therefore, this can be very detrimental to businesses to go through.
Ultimately, Edmonton bookkeeping says that what the auditor is looking for, is what happened to the source deductions. The view source deductions as government funds that are being held in trust. The money belongs to the government, and if the business owner has not paid enough, or paid late, they are going to want to figure out where we went and to determine if an entrepreneur used it to fund their business, or to pay themselves.
Business owners can simply avoid going through this traumatic experience simply by avoiding the circumstances that can trigger a payroll audit. They should pay their source that actions on time, in the correct amount, and file their T fours on time every year.