CFO Services | Best Employment Practices
50% of all businesses close their doors within five years says CFO services with 29% of those businesses saying that running out of money was tripping factor to having to close their business. Business owners are under a lot of pressure to ensure that their cash flow remains positive in their business as a way of achieving success. By avoiding certain hiring errors, they can be assured that they will never b audited by CRA for incorrect payroll says in their business. The single biggest error that businesses can make in this regard is hiring employees as contractors.
Often business owners who have started this practice of their business say that they have never had a problem doing it, therefore they will continue to do it. That is actually huge problem says CFO services because it is a problem that just hasnít caught up to them yet. But when it does catch up to them, it will be catastrophic. If CRA audits their payroll and found to be at fault, they will have to pay for every error that was made, including interest and penalties. This can add up to a very significant amount, and business owners are rarely able to financially recover.
This is an extremely avoidable error, as long as business owners avoid this with the very beginning, you can rest assured in their business that they will be assessed with this problem. They very easy rule of thumb is when the hire an employee make sure they will have their source deductions taken off their check, and if they hire an independent contractor, make sure that contractor is incorporated. Big successful companies use this practice in order to minimize their risk, and when it is used, it eliminates risk 100% of the time.
So what can businesses do if they have started doing this, but now want to eliminate their error? CFO services says that this is an extremely easy problem to fix and businesses. All you have to do is switch contractors to employees. Once those contractors start paying source deductions, the air is mitigated. The other option business owner has to fix this error, is ask the independent contractor to incorporate themselves. Once that contractor is incorporated, the business owner has successfully eliminated that risk in their business.
Since this is an extremely avoidable error in the first place, and extremely easy to fix says CFO service, there is no reason why any businesses should continue to undertake this extremely risky and potentially financially costly practice. If they are audited by CRA, it will have the potential to financially devastate their business, and business owners believe they will be able to convince CRA to rule in the way they want them to, but this is rarely the case. CRA auditors will look at the facts of the case, with no emotion often talking to employees contractors and accountant of the business in order to make their determination. As owners can completely eliminate this threat from their business anytime they want.
Often business owners do not seek professional help when they need it until itís too late says CFO services. One of the examples of this is when business owners approach their accountant after they have been crushed financially by retroactive payroll taxes. This includes steep penalties and interest charges simply because there contractors have been deemed employees by CRA.
This is a completely avoidable issue in businesses, that business owners can take care during the hire practices to avoid. The most simplest way to avoid this problem is when hiring independent contractors, to only hire incorporated contractors says CFO services. Big successful companies use this tactic to avoid the issue altogether. Since the risk is on the business itself when they hire contractors who are unincorporated. Business owners to hire employees should make sure that your source deductions are being taken off their checks properly, and then they will never have to worry about this problem plaguing the business.
Many business owners who have started making this air business often donít take the steps to fix that, because they have been lulled into a false sense of security, thinking that since theyíve gotten away with it for so long, they will never be caught. But just because they havenít caught doesnít mean that itís not a problem. When they get caught by the CRA, the length of time that theyíve been doing it will just increase the seriousness with CRA.
The way the business owners will be assessed by CRA will be for every contractor that has been deemed an employee, they will have to pay back every source deductions that was missed since the beginning of their employment. Times that by the number of employees plus interest plus penalties. This can add up extremely quickly and be financially devastating to a business. Therefore the longer the business owner has been this mistake, the more it will cost them. Many businesses do not recover from this financial error says CFO services.
The good news is fixing the air is very quick and very easy for business owners reassures CFO service. All they have to do is ask their independent contractors to incorporate. If the business owner waits until that contractor is due for a pay raise, they can use it as a way to leverage the cost it will occur through incorporation. Many people will not have an issue with incurring the costs, if that means they will be getting a pay raise. Another way businesses can fix this error, is by simply switching contractors to employees the proper source deductions. Again, business owners can wait until an employee is scheduled for a pay raise in order to not rock the boat on place suddenly having to pay taxes where they were being taxed before.
With how easy this problem is to avoid, and how easy it is to fix, business owners should be assured that they can easily ensure that this problem will be something that they ever have to deal with in their business.