CFO Services | Avoiding Common Hiring Mistakes
One of the biggest and most devastating mistakes is is owners can make when they are hiring employees and contractors in their business says CFO services, is by hiring employees as contractors. Business owners often seek professional help after being crushed financially by retroactive payroll remittances plus interest plus penalties because their contractors have been deemed employees by the CRA.
This is completely avoidable problem says CFO services a business owner should first understand what CRA will deem contractor and what CRA will do an employee. The first and most important factor when CRA is determining if someone is a contractor, is what is there profit and loss risk. If that contractor has the ability to lose money, that can be considered a legitimate business person by the CRA. Other things that goes into the profit loss factor is do they have to pay their own bills, do they have to buy their own equipment, do they have the potential to take on a job lose money?
The second most important factor when CRAís determining who is an employee who is a contractor, is how much control the business owner has over that person says CFO services. Does that person have the ability to have other clients? Can they hire their own replacement, or does the business owner require that specific person to do that specific job? These things can point to whether that person is an independent contractor or if there an employee. The more control a business owner has over the person can point to whether they are an employee.
Once a business owner can understand the difference between who is a contractor and who is unemployed, they can then avoid hiring incorrectly in their business. An employee must have the appropriate source deductions taken of their check, for example CPP and EI. The reason for that is CRA requires those taxes to be paid. A business owner can completely avoid all risk to them if they ensure that they are always hiring independent contractors who are incorporated. If they make that there hiring practice, they will never have this issue, and never be at risk by an audit from the CRA on their payroll.
So what can a business owner do if they have made this mistake in the past asks CFO service. Luckily it is extremely easy for business owners to fix this mistake. Itís a very fast mistake that will instantly eliminate the risk from their business. This is especially important for business owners who have been taking this risk for several years, but then have gotten their business to a point where they would like to run a clean operation. All business owners have to do is ask they are independent contractors to become incorporated, or they can simply switch those contractors to employees at any time. A business owner may want to wait until itís that employees time to get a pay raise, and change it along with their pay raise. This is less likely to rock the boat, since the employee or contractor is going to be getting a raise, they will be less likely to question the change.
A huge problem that some businesses face today is they to have had their payroll audited by CRA and are about to be financially crushed by retroactive payroll remittances, penalties, and interest because their contractors have been deemed employees by the CRA says CFO services. This is a huge problem, because the financial implications in the business is huge, but it doesnít actually have to be a huge problem because it is completely and totally avoidable as well as very easily fixed.
What can a business owner expect penalty-wise if they are making this mistake and CRA does payroll audit on them? A business owner can be assured that for every contractor that was deemed and employee the business owner will have to pay each source deduction that theyíve missed retroactively dating back to the employees start date. The business owner will be assessed that the employee and then on top of that amount they have to pay, they will receive interest and penalties on top of that. Depending on how long the business has been in operation for, and how many employees that business has, this can be a financially crushing blow to them says CFO services.
When the business owner gets audited, what can they expect – CFO services has some business owners believe that they will be able to convince their CRA auditor will the way they want them to, that they will be able to appeal the decision. Unfortunately this is not the case, auditors look upon the facts extremely judiciously, doing their own research together the information that they need to make their judgement. The will talk to the business owner, but as well they will talk to the employees and the contractors perhaps even the accountant of the business. Once they have made the decision, they will send in the assessment and then the business owner will be expected to pay it. It is a very fast and very emotionless process. Any business owners who think they will be able to convince the CRA otherwise, are mistaken.
When the reasons why business owners continue to allow this air to have been their business, is that theyíve been doing it for such a long time and have never run into a problem, so they believe they can continue to do it. Just because you havenít gotten in trouble yet doesnít make it okay to do. The longer they allow this problem to continue, the more the penalties are going to add up when CRA does discover that they have been allowing this to happen in their business Says CFO service.
Avoiding common errors when business owners are bringing on staff, they can avoid making some decisions that will get them in big trouble with CRA.