Business owners need to understand that the not only have to be withholding the correct amount of source that actions from employees paychecks says Edmonton bookkeeping. But also, if they had any contractors working for them, they need to be very aware of what Canada revenue agency considers a contractor. The reason why, is because contractors do not have source deductions being withheld from their pay. However, if they are deemed an employee by Canada revenue agency, the responsibility actually falls onto the business owner to pay source deductions on their behalf. In fact, this is one of the highest penalties that Canada revenue agency issues, and business owners should be very aware of what Canada revenue agency considers the contractor and what they consider an employee, so that they can avoid this problem in their business.
The amount of control that a business owner has over that person ultimately determines whether they are the employee or contractor says Edmonton bookkeeping. The more control that a business owner has over that person, the more likely they will be considered employees. Therefore, business owners take into consideration who controls their schedule, who sets their wage, who controls what job they take or not? Other questions include who pays the bills, who buys the supplies and materials, and who owns the tools that the person uses to get the job done. Ultimately, who dictates how that job gets done.
Employees will typically be dictated what their wage that they get paid will be, and the business owner will be in charge of issuing wage increases. They will typically be expected to show up to work at a sets time, and stay set number of hours. Also, employees will not have any of the risks associated with owning a business, not owning any of the out tools used to get the job done, not have to pay any bills, and not buying any of the supplies and materials needed to get the job done. Employees will have absolutely no risk associated with their job. They will always profit, and have no risk associated with their job.
Contractors according to Edmonton bookkeeping can come and go from the jobsite when they want, will be able to hire staff to get the job done if they need, they are the ones that set the amount of money that they will get paid to do a job, and issue that invoice to the business owner. It will also typically own their own tools, pay their own bills, and by the supplies materials needed to do the job. Ultimately, the contractor has risks associated with their job, they may turn a profit or they could lose money on a job.
Employees must have source deductions withheld and then passed on to Canada revenue agency says Edmonton bookkeeping. And contractors do not, because they will be expected to remit their own source deductions when they complete their taxes at the end of the year. If business owners have hired a contractor, but Canada revenue agency deems they are employees, then the business owner will be on the hook for paying all the source deductions that they owed.
Edmonton Bookkeeping | Understanding Source Deductions
Many business owners face a huge challenge in their business financially says Edmonton bookkeeping. In fact, 29% of all failed business owners say that the reason why their business was not successful was because they ran out of money. Therefore, business owners need to be very aware of ensuring that they are avoiding incurring extra penalties wherever possible, because that could put a financial strain on their business. One way that business owners can avoid incurring penalties, is by ensuring that there withholding and permitting source deductions correctly.
Not only does this mean knowing how much in income taxes, CPP and EI that they have to withhold from their employees says Edmonton bookkeeping. The business owners also need to know that they need to remit CPP and EI on the half of themselves as well. By remitting this amount before the fifteenth of the following month every month can ensure that business owners are not going to incur penalties from Canada revenue agency this way. However, if the have hired any contractors in their business, they may be at risk.
The reason why, is while contractors do not have source deductions being remitted to Canada revenue agency on their behalf, if Canada revenue agency determines that they are actually employees not contractors, then been so owners will be responsible for paying all of the source deductions that they owed since that contractor was hired Depending how long you been working with the business owners says Edmonton bookkeeping this can be a significant amount of money.
Not only will business owners be expected to pay all the source deductions that they should have remitted, but there will also be a penalty on top of that. Edmonton bookkeeping says that the penalty is a 20% interest on the entire amount that they owe. However, business owners need to be aware that this penalty is going to accrue every single day. Which can end up being very financially crippling. If a business owner only owes a thousand dollars at the beginning, that will end up being three thousand dollars by the end of the week. Therefore, business owners will want to pay that amount as quickly as they can. If they cannot, not only may they find it very hard to and updating, that it may force them to have to close their business as well.
By understanding that business owners need to ensure that they are remitting the source of actions correctly, but also it is important that they understand if they have contractors, to be very clear that they are contractor. Edmonton bookkeeping says business owners may want to draft up an employment contract, so that they can prove very quickly that they are contractor. Or simply require all contractors to be incorporated, because that will eliminate the risk completely.