Business owners only after being audited by the CRA realize how big the payroll errors that they made were says CFO services. After the contractors have been deemed employees, entrepreneurs have been crushed financially when there assessed with retroactive payroll remittances, penalties and interest. This is completely avoidable error in business, that all business owners should know how to avoid in order to eliminate the risk in their business. Any business owners who are currently making this error, should know that this is very fixable problem that can immediately eliminate the risk in their business.
So what are the risky behaviours that business owners are utilizing in their payroll asks CFO services. Business owners who their employees as contractors in order to avoid paying their source deductions to the government is the issue that is at hand. The reason why this is risky behaviour, is because CRA is not a fan of businesses not paying their taxes. However business owners have been doing it for a long time and donít see it as a problem because they havenít been caught yet. But just because they have been caught doesnít make it right. When the CRA audits them, and assesses them, their business will be in for some very troubling times financially.
Business owners can completely avoid this issue altogether by ensuring that all of the employees they hire have the right source deductions taken of the check, and that independent contractors they hire are incorporated. Itís a very simple rule that can completely and totally eliminate the business ownerís risk. The rewards are definitely not worth the risk in this case, the penalties are far too severe says CFO service.
Entrepreneurs tend to have a false sense of security on this because they have been getting away with it for so long, and honestly believe that they are doing nothing wrong, so they think they will be able to convince CRA to rule in the way they want to. Unfortunately this rarely is the case.
CRA auditors donít look on entrepreneurs who are making this mistake very favourably. Their sole job is to emotionlessly judge the facts and decide if contractors should be deemed employees. They will do research, interview people, and come to their determination, based solely on the facts. Itís a fairly heartless process, and the business owner will not get an opportunity to appeal says CFO services.
So what will typically have been if CRA has deemed those contractors as employees of the business asks CFO service? The business owner will then be required to pay all of the source deductions that have been missed dating back to the original start date of each employee. Plus they will be assessed interest and penalties will be added on top of that. It can be a huge amount, especially if that business has several employees, and has been in operation for several years.
Itís definitely not worth the risk to engage in this behaviour, at least business owners can know that this is an easily fixable issue.
Business owners started their business and hired on people, but they hide them on as independent contractors, and now theyíve been in operation for several years, and they are worried about getting audited says CFO services. This is a legitimate concern, because businesses who have been making this mistake, have been assessed by the CRA have ended up having to pay hundreds of thousands of dollars, which has either financially crippled the business, or have forced them to shut their business down completely.
Often times entrepreneurs have been doing this for such a long time that they believe isnít an issue because they havenít been found out yet. Unfortunately when CRA does find out, the results on their business can be catastrophic. Just because a business owner hasnít been discovered it doesnít make it the right thing to do. Business owners can completely avoid this issue in their business says CFO services if they follow some very simple hiring practices. When they are hiring staff, if theyíre bringing on an employee as long as they make sure theyíre taking off the right source deductions from your paycheck, there is no problem. If that business owner is hiring an independent contractor to work for them, as long as they hire an independent contractor who is incorporated, they are fine. Businesses who have implemented this strategy, have avoided this issue altogether. Since itís such an easy situation to avoid, most businesses should ensure that they donít make this mistake in their business.
The problem comes in when business owners start to do this, and then arenít caught up right away by CRA, they believe they will be able to convince CRA to rule the way they want them to rule, or that they can talk themselves out of a fine. CRA is very emotionless when it comes to doing audits says CFO services. They do research, look at all of the facts, and then send in their assessment. It is a fast and heartless process, where business owner wonít get the opportunity to appeal. If business owners believe that they can either talk themselves out a fine or overturning appeal, they are mistaken.
Business owners can by hiring practices, but if business owners have been making this mistake in their business already, they can be assured that they can immediately eliminate the risk by ensuring that they either switch their contractors to employees with the appropriate source deductions, or they ask their contractors to get incorporated. A good way business owners can do this is by waiting until they are due for a raise, and then letting them know that that will be condition of their raise. Most people will be agreeable to this with the promise of more money. The minute they do this in their business, they can completely and totally get rid of their risk and focus on running the company.