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It is very important that entrepreneurs understand not only what T4 and T fives are, but the difference between the two and when to file them says Edmonton bookkeeping. If they misunderstand the information on those slips and when to file them, they could find themselves triggering penalties, or even payroll audits for themselves. This can not only cost an entrepreneur a lot of time, complying with Canada revenue agency’s auditor, but can also end up with penalties that can be financially crippling. Since 29% of all failed businesses attribute their failure to running out of money, entrepreneurs should take this very seriously.

The first thing that entrepreneurs should understand, is what amounts are being recorded on T4 and T5 slips. T4 slips are for recording all of the payroll deductions for all salaried employees of the business. This includes shareholders and business owners, if they are taking a salary. The T fours are taking note of all of the taxes that needs to be paid on behalf of those employees. That includes income tax, CPP and EI. If entrepreneurs and shareholders are also taking a salary, they need to understand that they have to pay those taxes as well. In addition to that, Edmonton bookkeeping says that entrepreneurs also have to pay an employer portion of CPP and EI, which the EI is one point 4% higher than what their staff pays.

A T5 slip on the other hand is for recording all of the dividends that shareholders only have been paid. Since dividends are disbursements of the earnings of the corporation, only shareholders are entitled to collect dividends, and absolutely no source deductions need to be taken off of dividends. Edmonton bookkeeping says that how much salary and how much dividends an entrepreneur is going to be collecting is a complex question that needs to be answered by their accountant and bookkeeper.

Once an entrepreneur understands what is being recorded on the T4 and T5 slips, Edmonton bookkeeping says they then need to understand when these slips need to be filed every year. The filing deadline for these is the last day of February of every year. If an entrepreneur files late, they should understand that they will trigger penalties. The penalties for filing a T4 and T5 slips late, is an amount of money per employee and per day. The more employees that an entrepreneur has, and the more days that they are late, increases the penalties that they will have to pay.

When an entrepreneur files there T4 and T5 slips, that will tell Canada revenue agency how much they should have paid in source deductions. If an entrepreneur has not paid the correct amounts, Edmonton bookkeeping says that this can trigger a payroll audit. This can be completely avoidable, if an entrepreneur looks at what they should have paid in source deductions prior to filing, and then sending CRA a payment for the amount that they have underpaid, and then file that can avoid triggering an audit in their business.

Edmonton Bookkeeping | Understanding What T4s And T Fives Are

It is very important that entrepreneurs learn early on in their business what T4 and T fives are, as soon as they start paying salary or dividends to themselves or any employees says Edmonton bookkeeping. They can inadvertently trigger penalties as well as audits if they file the incorrect amount, or file late. While it is extremely easy to avoid, the sooner an entrepreneur can learn what to do, and establish these good habits, the likelihood of making errors diminishes.

Once an entrepreneur learns what a T4 and T5 slip is, the next thing they need to understand is when they need to submit payroll remittances to Canada revenue agency. The vast majority of businesses in Canada remit source that actions by the fifteenth day of every month. Edmonton bookkeeping says whichever month has the pay date in it, the following month is the deadline. For example, if an entrepreneur has issued a payroll in May, June 15 is the deadline for those remittances.

It is very rare, and only on approval, but some businesses can remit source deductions on a quarterly basis. If the entrepreneur is the only employee, and they get special permission granted from Canada revenue agency, they can remit their source deductions on a quarterly basis. However, when in doubt, businesses can simply submit payroll remittances by the fifteenth every month to avoid issues.

Entrepreneurs should also keep in mind that as long as they are paying before the fifteenth of the month, they are not going to trigger any audit or any action from Canada revenue agency. Therefore, if they are accidentally underpaying source deductions, they are not going to get a letter from Canada revenue agency. Edmonton bookkeeping says that Canada revenue agency waits until an entrepreneur files there T4 and T5 slips, in order to see the source deductions that they should have paid. Therefore, if they have been underpaying, they need to look at their T4 slips prior to filing them to verify that they paid the correct amount. If they have not, they can simply send Canada revenue agency a check for the remaining amount prior to filing to avoid triggering a payroll audit.

If an entrepreneur does not pay source deductions by the fifteenth, Canada revenue agency may question why, and that could trigger an audit as well. Therefore, it is not only important that entrepreneurs are paying the correct amount, but that they are also paying on time. However, even though an entrepreneur might be working very hard to ensure that they are not paying late and paying the correct amount, Edmonton bookkeeping says that they might still find themselves underpaying Canada revenue agency. If this is the case, will most likely get a letter from Canada revenue agency asking to explain the discrepancy. This is the case, the recommendation is for entrepreneurs to simply pay the amount owing, because if Canada revenue agency is not satisfied with their explanation, this will trigger an audit.