Even though many entrepreneurs have never run a business before, Edmonton bookkeeping says that there are several things that entrepreneurs need to learn right away in their business to avoid triggering penalties with Canada revenue agency. One of those things, is learning what is being recorded on a T4 and T5 slip, and how to file them properly. If entrepreneurs make mistakes in this area, not only can they trigger penalties, but they could also potentially trigger an audit that might end up costing an entrepreneur so much in penalties, that they are unable to recover.
The first thing that entrepreneurs need to know, is what amounts are being recorded on T4 and T5 slips. A T4 slip keeps track of all of the payroll deductions that an entrepreneur needs to pay for every employee. This includes themselves, if they are taking a salary from the business. This means their income taxes, CPP and EI for the employees, as well as CPP and EI that must be paid from the employer as well. A T4 on the other hand says Edmonton bookkeeping is keeping track of all of the dividends that all the shareholders of the corporation have taken from the earnings of the corporation.
Regardless of the different data that is being recorded on a T4 and T5, both need to be filed every single year by the last day in February. This means February 28 or February 29 in the leap year. If an entrepreneur does not file their T4 or T5 slips on time, this triggers penalties from Canada revenue agency. The penalty is a certain amount of money per employee, per day that the filing is late. This can add up very quickly if an entrepreneur has several employees, or is very late.
By understanding the T4 and T5 slips, and entrepreneur must then understand that because the T4 slip is keeping track of payroll deductions, it is very important that business owners are paying payroll deductions correctly. Edmonton bookkeeping says this means ensuring that they are paid on time. The deadline for entrepreneurs to submit remittances to Canada revenue agency is the fifteenth day of every month, in the month following payroll. For example, if a business owner ran payroll in March, April 15 would be the payment deadline. If an entrepreneur pays on time, but the wrong amount, they are not going to get a notification from CRA until the end of the year. However, if an entrepreneur does not pay at all, that could trigger a letter from Canada revenue agency.
If entrepreneurs pay too little of source deductions says Edmonton bookkeeping, Canada revenue agency will see that when the entrepreneur files there T4 slip. If they have underpaid, they could trigger an audit. Therefore it is extremely important that entrepreneurs are keeping track of all payroll deductions that they are remitting to Canada revenue agency at all times to avoid triggering penalties or a payroll audit.
Edmonton Bookkeeping | Why Entrepreneurs Must File T4 And T5 Slips Properly
If an entrepreneur does not to file their T4 or T5 slip properly says Edmonton bookkeeping, they could trigger penalties or even audits. It can be very easy to learn what entrepreneurs need to do in order to avoid running into problems with Canada revenue agency. However, it can also be very easy to make mistakes. By learning early on in their business, what entrepreneurs should do, they can be prepared to pay source deductions accurately, and never trigger penalties or audits from Canada revenue agency.
Even if an entrepreneur is paying source deductions by the fifteenth day of every month, if they are underpaying source deductions, they are not going to get notified of this until the very end of the year. Edmonton bookkeeping says that Canada revenue agency will know how much source deductions an entrepreneur should have paid by looking at their T4 slips. They will then compare it against the amount of source deductions that an entrepreneur has paid, and if there is a discrepancy, they will send a letter asking why. If this is the case, entrepreneurs should simply pay the amount owing, because if their explanation does not satisfy Canada revenue agency, this will trigger an audit.
If an entrepreneur wants to avoid getting this letter, or potentially triggering an audit, a good practice to get into would be to check the amounts that they owe on their T4 prior to filing, so that if they have underpaid, they can simply submit an additional payment to Canada revenue agency before filing their T4 slips.
If an entrepreneur is having trouble calculating the amount of source deductions they should be withholding from their employees checks, and submitting to Canada revenue agency, Edmonton bookkeeping says that there are programs that can help them with that. Most accounting software such as QuickBooks, QuickBooks online, Sage or zero should have the capability of telling entrepreneurs how much source deductions they need to withhold and remit. However, they can also use a program that Canada revenue agency has. Simply by entering the payroll amounts into the program, an entrepreneur will be able to check what source deductions they need to withhold and then submit to Canada revenue agency.
If an entrepreneur has underpaid, paid late, or has filed their T4 and T5 slips late, they potentially could trigger an audit, where the auditor will ask for copy of the business owners pay stubs, bank statements and PD seven A reports. The purpose of this is to look the information to see where the source deductions money went. Canada revenue agency is going to try to determine if an entrepreneur has used it to pay themselves, or fund their business. This is one of the stiffest penalties that Canada revenue agency has, because they view an entrepreneur not paying enough source deductions as an abuse of government money. Therefore it is very important that entrepreneurs do everything that they can to ensure that they are avoiding paying late, and paying the correct amount consistently.