One problem that business owners may face, is that when they go to hire staff for the first time, they might have an employee who wants to be paid like a contractor says that bookkeeping. New entrepreneurs might not see if there is any problem with that, and may agree. If this is a worker that should be classified as an employee instead, they can run into significant problems, including being assessed penalties but Canada revenue agency. Therefore, to help entrepreneurs avoid this, they should understand the difference between employees and contractors, and how to hire each one in their business properly.
When reason why an employee might want to be paid like a contractor says Edmonton bookkeeping is so that they do not have to have source deductions taken off of their pay. Contractors are typically considered their own business, and employees often are aware of this. They think that by getting paid as a contractor can save the money, as they will not have to pay source deductions. However, business owners need to understand that if Canada revenue agency realizes that the business owner is not paying source that actions, and neither does their employee, they will investigate.
If Canada revenue agency investigates and discovers that the contractor should actually be classified as an employee, the responsibility does not fall to the employee to pay the source that actions it falls to the business owner. A business owner may not realize this, thinking that they will not be on the hook since they did not withhold they taxes. However, Edmonton bookkeeping says that Canada revenue agency does not care if a business owner did not withhold taxes, they are the ones responsible for paying the taxes regardless.
Therefore, a business owner needs to be very aware that if they have an employee who wants to be paid as a contractor, a business owner should not let them, and fact ensure that all employees are paid accordingly, as are all the contractors. The determining factor ultimately boils down to how much control a business owner has over each person. The more control, the more likely Canada revenue agency will consider them employees. The lower amount of control, the higher liability, and they will be considered contractors.
Therefore, business owners should consider the answer to these questions: pays for the bills, who buys the materials and supplies, who owns the tools, who dictates rate of pay, and do they have to adhere to a set schedule. By taking these into consideration can help an entrepreneur understand who should be considered employees and who should be considered contractors.
When business owners truly understand the difference between employees and contractors, they can avoid making mistakes when it comes to remitting source deductions. Since this is what carries the highest penalty from Canada revenue agency, avoiding this penalty is extremely important thing for business owner to do. That can help ensure that they never have to pay penalties that could financially cripple their business.
Edmonton Bookkeeping | Why The Difference Between Contractors And Employees Matter.
If business owners do not understand that how they hire staff makes a difference, Edmonton bookkeeping says that they may be putting their business at risk. Not only is there huge difference between employees and contractors, but if business owners is not aware of this, they could end up putting their business at risk, by being assessed for penalties that can be very difficult to pay.
The reason why business owners need to be very aware of this, is so that they can the correct amount of taxes and remit them to Canada revenue agency. Source deductions carry the highest penalties if not done correctly says Edmonton bookkeeping. This is so that they can act as a deterrent to, and ensure that business owners are always paying the correct amount, and paying the correct amount on time. However, if business owners are not aware of the differences between employees and contractors, and more specifically that employees get source that actions withheld and contractors do not, can end up with an entrepreneur paying significant penalties.
For example, if an entrepreneur hires a contractor that should be deemed an employee by Canada revenue agency, not only will the business owner be expected to pay all of the source deductions that they owe since the first day that the contractor was hired. But in addition to that, Edmonton bookkeeping says that business owners will be assessed penalties of 20% interest. However, rather than this being per month or per year this is per day. Leaning this could add up significantly in a very short amount of time.
Since the majority of businesses struggle financially, with 29% of all failed businesses saying the reason why they failed was because they ran out of money this penalty can be severe. We hit with this type penalty could force a business to have to close, because the more that they owe, means they hire the penalties are going to be, and the harder it may be to pay. Therefore, business owners need to ensure that there being very careful of who is hired in their business, whether they are allowed to be considered a contractor, or if they are an employee.
Business owners may appeal if they get a ruling that is not in their favour. However, Edmonton bookkeeping cautions business owners that having the ruling overturned is very low. The reason why, is because Canada revenue agency wants to ensure that the getting all the taxes that they are entitled. Therefore, business owners need to ensure that they are either paying the source deductions, or that they will be able to claim that they are not to blame. This is either by having an employment contract, or simply by ensuring that all contractors that they hire are incorporated.
It can be very easy for an entrepreneur to ensure that they are either hiring all employees in their business, or any contractor that they hire has an employment contract, or is incorporated. By doing those two things, Edmonton bookkeeping says that entrepreneurs can avoid having to pay back taxes and multi-‘s to Canada revenue agency.