Business owners should know that a payroll tax risk is calculating or remitting source deductions incorrectly. This is easy to avoid, however, if entrepreneurs do not make plans ahead of time to prepare themselves how to avoid making those mistakes, not only are the penalties steep and fast, you could trigger an audit, and have Canada revenue agency aggressively collecting the money from entrepreneurs. Encountering these problems could cause huge issues for an entrepreneur that might even end up costing an entrepreneur far more than money. However, the good news is it is easily avoidable by knowing what to do and creating a plan.
One of the first things that an entrepreneur needs to understand in order to avoid payroll tax risks says Edmonton bookkeeping is knowing the various components of Canada revenue agency remittances. Not only do entrepreneurs need to withhold taxes from their staff, but they also must withhold certain taxes from their own paycheck if they pay a salary to themselves, as well their business needs to submit remittances as well. These various components are income tax, CPP and EI that must be withheld from the entrepreneurs’ staff. There is also the employer portion of CPP and EI, and Edmonton bookkeeping says that entrepreneurs need to take note that the employer portion of EI is actually higher than the employee’s portion by one point 4%. Also, an entrepreneur must withhold CPP and EI their own check if they are paying themselves a salary.
Not only is it important for entrepreneurs to know exactly how much source election to calculate, but how to avoid a payroll tax risk is by ensuring that they are not paying the Canada revenue agency late. The potential penalty that business owners might get hit with for being even a single day late on payroll remittances is 20% interest calculated every day. This is extremely high and is used as a deterrent. If business owners are appropriately scared of this penalty, they will do everything in their power to avoid paying late.
Therefore, in order to avoid paying late, the first thing that entrepreneurs need to know about schism bookkeeping is the deadline. Most entrepreneurs are small enough to only have to pay once a month, and the deadline for all entrepreneurs is the fifteenth of every month. Whichever month that they ran payroll in, the deadline will be the fifteenth of the following month. However, Edmonton bookkeeping recommends that entrepreneurs do not wait until the fifteenth of the month to remit source deductions. Too much can go wrong that would end up, causing Canada revenue agency do not receive the payment on time. Therefore, entrepreneurs should get into the habit of remitting sources that actions at the same time that they run payroll. Not only is this fast because they are already doing the calculations, and grading payments for their staff, but also by remitting source that actions at the same time as payroll, can guarantee that an entrepreneur is never late on paying their remittances.
By being aware of all these requirements can help an entrepreneur create a plan so that they are doing it correctly and avoiding penalties and audits. By having this plan in place prior to running payroll can ensure that an entrepreneur does not make errors from the beginning, and also so that they can hand this task off to other employees as they are hired, for them to do it accurately that an entrepreneur can focus on growing their business.
Edmonton Bookkeeping | What Are Payroll Tax Risks
If an entrepreneur is either behind on remitting their source deductions, or if they are remitting the incorrect amount schism ten bookkeeping, these are considered payroll tax risks. There are penalties associated with being late, or not paying the right amount that can easily be avoided by understanding what business owners need to do, and grading a checklist that they can use every time they run payroll to ensure that they are doing this accurately.
It is very important that entrepreneurs know how to calculate all the source deductions accurately so that they can be remitted to the Canada revenue agency. However, they will get notification from the Canada revenue agency to let them know if they are not submitting the correct amount. Therefore, if an entrepreneur has calculated the amount that they owe wrong, they might not be aware of it until they file their T4 slip, and Canada revenue agency will compare what they should have submitted against what they have. If there is a discrepancy, they may issue a letter requiring a business owner to explain the difference. If they cannot explain it, this can trigger a payroll audit.
In order to avoid triggering a payroll audit, there are things that entrepreneurs can do that can help ensure that they are paying the correct amount prior to filing their T4 slips. One strategy that business owners can use according to Edmonton bookkeeping is to pay a bit extra every month when remitting source deductions. Many entrepreneurs do this so that if they are making errors in their calculations, they are making up for it. By slightly overpaying, when it comes time to file their T4 slips, know that they will not trigger an audit by underpaying.
Another strategy that entrepreneurs can use to ensure that they have paid the appropriate amount to Canada revenue agency, is to be aware when they are creating their T4 slips, and review the amount that they should have submitted against what they have paid prior to submitting the T4 slip. If they have underpaid, they can make a lump-sum payment to the Canada revenue agency by January 15. By doing this, and then filing their T4 slip can ensure that an entrepreneur is avoiding triggering an audit in their business.
By being aware of all of the ways that an entrepreneur can avoid underpaying their source deductions can help them create a plan that they can follow consistently. Whether they are doing the payroll themselves or handing it off to an employee, this plan can ensure that everything is done accurately and on time so that an entrepreneur will never be audited or be hit with a penalty. They can then use the time to accomplish all the strategic priorities they need to in their business in order to grow.