Sorry important that entrepreneurs understand how to avoid trigger a payroll audit in their business says Edmonton bookkeeping. There are several things that could cause Canada revenue agency to want to do a payroll audit from not filing a T4 or T fives in their business on time, to paying source deductions late, to not paying the correct amount. However, all of these things are avoidable if entrepreneurs are made aware of them early on in their business.
One of the first things that business owners need to know, is that if they are paying employees or themselves salary, they need to be withholding source deductions from those paychecks. This includes income taxes, CPP and EI not just for the employees, but if an entrepreneur is taking a salary, is needs to come off their check as well. However, Edmonton bookkeeping says that entrepreneurs also have to pay an employer portion of CPP and EI on top of that. All of these things are recorded in a T4 slips that they must file every year. The deadline for filing those is February 28, or twenty ninth in the leap year. The reason why this deadline exists, is so that an entrepreneur can ensure that their staff have the T4 slips that they need in order to get their personal taxes done. Since that deadline is April 30, entrepreneurs need to ensure that they have the T4 slips filed in time for their staff to do that.
If entrepreneurs and up not filing their T fours on time, it will trigger penalties for the business owner. The penalty for not filing a T4 slip on time is a dollar amount, which depends on how many employees and entrepreneur has. This dollar amount is calculated for every employee that a business has, and charged to them for every day that they are late filing. This can add up very quickly, especially if an entrepreneur has many employees, or is very late in filing.
The next thing that an entrepreneur needs to ensure is that they are not paying late. Even though bookkeeping says that the deadline to submit payroll remittances is the fifteenth of every month, in the month following when payroll was run, business owners should ensure that they are not waiting that long to remit source that actions. In fact, a good habit to get into is for entrepreneurs to remit source deductions at the same time that they run payroll so that they will never be late.
Finally, entrepreneurs need to ensure that they are paying the correct amount, says Edmonton bookkeeping. If they find their having a hard time trying to calculate the amount themselves, they can either use their payroll or accounting software, or go to the Canada revenue agency website, to use their source deductions calculator, and find out how much they should be withholding from each check.
When entrepreneurs are aware of what they can do to avoid triggering a payroll audit as well as avoid incurring penalties, they will be able to remit source deductions more confidently, knowing that they will not cause any hardship their business.
Edmonton Bookkeeping | What Business Owners Can Do To Avoid Payroll Audits
Business owners need to understand that triggering a payroll audit can be devastating to their business says Edmonton bookkeeping. Not only will it disrupt their business, and cost a lot of time, but it can also and up triggering significant penalties that can be very difficult for entrepreneurs to pay. Since 29% failed entrepreneurs say that the reason why they failed was because they ran out of money in their business, avoiding incurring penalties can be significant in helping entrepreneurs avoid that fate.
If an entrepreneur has either paid source deductions late, or the incorrect amount, Edmonton bookkeeping says that business owners could find themselves being contacted by Canada revenue agency to participate in a payroll audit. An auditor will request a bunch of information from the business owner including pay stubs, Inc. statements as well as a report called a PD seven eighty. This report will show what source deductions entrepreneurs should have paid.
It is a very important thing for entrepreneurs who are utilizing checks to pay themselves either salary or dividends, that they avoid putting the salary, or dividends on the memo line of the check, as this will significantly limit what their accountant or bookkeeper it is going to be will attribute that check towards. Therefore, if entrepreneurs are paying themselves as salary or dividends through company checks, they need to be very careful of what they put on that memo line.
What the Canada revenue agency auditor is looking for, is to find out where the source deductions went. Since an entrepreneur has withheld that money from their staff, if they have not remitted it to Canada revenue agency, they want to know why. If and entrepreneur use that money to pay themselves, or use it in their business, that is the goal of the auditor.
Canada revenue agency actually assesses source deduction as some of the highest penalties that Canada revenue agency dishes out says Edmonton bookkeeping. The reason why, is because the view source deductions as government money that an entrepreneur is simply collecting on their behalf. If an entrepreneur does not pay the correct amount, or does not paid on time, they view it as a misuse of the government funds that they have been entrusted with. That is why it carries such a harsh penalty.
In order to help entrepreneurs avoid being assessed a payroll audit, they can follow three simple rules, file their T4 and T5 slips on time, pay the correct amount of source deductions, and pay the source that actions before the deadline. Edmonton bookkeeping says that if an entrepreneur follows all of these rules, they can ensure that they never have to incur penalties, or ensure a payroll audits in their business. By following these rules, entrepreneurs can run their business and learn what they need to grow.