Business owners should be aware of the differences between employees and contractors when they start to hire workers in their business says Edmonton bookkeeping. The reason why, is because the way that taxes are remitted to Canada revenue agency is different for both of those types of workers, therefore business owner needs to be aware of who they hire in their business, so that they can end up paying taxes correctly, and avoiding not only having to pay back taxes, but be able to avoid paying penalties on top of that. Since many business owners struggle financially, with 29% of all failed entrepreneurs saying that the reason why they failed was because they ran out of money. Business owners are able to avoid making a mistake on their source deductions, they can avoid having to financially burdened their business even more than already might be.
Ultimately, business owners need to understand that Canada revenue agency views source deductions as an extremely serious tax to pay. In fact, it is the most serious one, that carries the highest penalties if not paid accurately. The reason why says Edmonton bookkeeping is in order to act as a deterrent to business owners. There is a high enough penalty, ideally business owners will not take chances with that, and will pay accurately and on time. However, in order for a business owner to avoid making mistakes with this, they need to understand the differences between employees and contractors, so that they can withhold the taxes properly.
Business owners who make the mistake, if they are caught by Canada revenue agency, not only will have to pay all of the back taxes that they owe, which means all of the income taxes, CPP and EI that should have been withheld from that employee from the day that they were hired. But also, Edmonton bookkeeping says that an entrepreneur must pay the employer portion of CPP and EI as well as, dating all the way back to the first day of their employment. In addition to that, business owners will get assessed a penalty. This is an interest charge of 20%, and its accrued every single day that a business owner does not pay the amount owing. Business owners that find themselves being assessed this, they find it very difficult or impossible to dig themselves out from.
When way that business owners can avoid this in their business, is either by saying that there only going to hire employees in their business, therefore everybody gets source deductions withheld. Or, a business owner simply creates an employment contract, and ensures that all workers adhered that employment contract. Alternatively, business owners might find it helpful to say that if they do higher contractor, that contractor must be incorporated, and then a business owner completely eliminates their risk factor associated with this. Whichever way a business owner decides to operate, understanding the difference between the two is very important to ensure that they are withholding and remitting the correct source deductions.
Edmonton Bookkeeping | Withholding Source Deductions Accurately
If business owners do not take enough due diligence they are hiring staff in their business says Edmonton bookkeeping they may get hit with penalties unsuspectingly. In fact, this is something that business owners need to be very aware of, because they may even believe that they are adhering to the law correctly, and then get assessed by Canada revenue agency. Therefore, business owners should understand differences between employees and contractors, so that they can ensure that they are paying taxes correctly, and they will never get hit with additional penalties from Canada revenue agency.
Ultimately, when a business owner hires a worker for their business, they can either hire them as an employee, and then the employee has source deductions withheld from their paycheck, and a business owner remits them on their behalf to Canada revenue agency. A contractor on the other hand says Edmonton bookkeeping does not get any source deductions withheld, and they must be responsible for telling the government how much income they made, and remitting source that actions themselves.
The problem comes in, when a contractor does not disclose to Canada revenue agency how much money they made, and does not remit all of the source deductions properly. A couple or more years. Ultimately, if the Canada revenue agency investigates, their goal will be determining if that contractor that is not paying source that actions correctly should be considered an employee or if they should be considered contractor. By trying to discover this, Canada revenue agency is discovering who should be on the hook for paying that source that action.
Business owners should keep in mind that if they are assessed as needing to pay the source deductions for that worker, it does not matter if an entrepreneur did not withhold those taxes, they still are on the hook to pay them. Which is why it is very important that business owners are understanding the difference between contractors and employees.
Edmonton bookkeeping says that the biggest differences between them is the level of control that a business owner has over them, and the amount of liability that they have. Ultimately, the more control the business owner has, means that they are likely to be considered an employee by Canada revenue agency. And the more liability that they have, they are more likely to be considered contractor by Canada revenue agency. Therefore, employees leave work for us at wage that the business owner controls, for a set schedule, that a business owner controls, but they hold no liability for expenses, supplies or tools that they work with.
Contractors on the other hand have a lot more freedom, they dictate the rate of the there schedule, but because of that freedom, they have a lot of liability, by paying for their own bills, supplies and materials, and have the ability to profit or not. Therefore, business owners should think of intent, as they figure out if they are an employee or contractor, so they know how to withhold source deductions accurately.