CFO Services | Hiring Errors
Business owners often go to the accountant after they have been crushed, or are about to be crushed financially by retroactive payroll remittances, penalties and interest says CFO services. The reason for these fines are because their contractors have been deemed employees by the CRA. This is a completely avoidable problem that businesses donít meet to face, all they need to do is not make this mistake in the first place.
Hiring unincorporated contracts is a risky move, because business owners who start doing it and donít get caught right away, donít think that it actually is a problem. But just because they havenít been caught doesnít mean they will be caught cautions CFO services t. And the longer they get away with it, will mean the more they will have to pay when CRA finds out. It is an extremely high risk move, that doesnít have a lot of reward attached to it. Many businesses who have been assessed by CRA, have seriously crippled their businesses, or have had to close their doors because of it.
The great news in all of this is that it is an extremely problem to avoid. Many big and successful companies avoid this issue altogether by never hiring an unincorporated contractor. Since the responsibility falls on the business owner to ensure that there contractors and employees are in order, by putting the rule in place that they will never hire someone who is an incorporated, these businesses can avoid liability altogether says CFO service.
Business owners can take a look at all of the contractors that have a working for them, and by figuring out how much each one is getting paid to figure out their risk potential. If they only use the contractor a few times a year and only pay them a few hundred dollars each year, there is not a huge risk. CFO service says the risk increases if the contractor has been paid to several thousand dollars a year, and how many years that contractor has been paid. More they have been getting paid and the longer theyíve been working, risk goes up.
Businesses who have been getting away with this, but want to eliminate that risk now, CFO services says that is also an extremely easy fix. Any entrepreneurs would like to eliminate this risk business can easily do so by switching contractors to employees, or by asking unincorporated contractors to incorporate themselves. These unincorporated contractors may be more agreeable to incurring the costs of incorporating themselves, if a business owner waits until a typical pay raise to ask them. Then they might be happier to incur the cost, knowing that it will be getting paid more anyway.
With so easily avoidable is problem is, and how easily fixable this problem is says CFO services. There shouldnít be any business owners who are getting hit with this assessment, they can potentially cripple or close their business. Business owners should be aware when they are hiring, to avoid this.
One of the biggest mistakes business owners can make when they are hiring staff, is to consider them independent contractors in order to avoid paying CRA source deductions says CFO service. There is not a huge gain for business owners to do this in their business, and the risks are huge, and the penalties severe. Business owners can completely avoid the situation by ensuring that employees have sourced actions taken up their paycheck, and if an entrepreneur is hiring an independent contractor, they can ensure that they are incorporated.
Entrepreneurs who started doing this in their business, often believe that they can continue to do that because they havenít been caught yet. But just because they havenít been found out by CRA, doesnít make it the right thing to do. It can lull business owners into a false sense of security because since theyíve been doing it and have been fine, so they believe they can continue to do it. Once CRA audits them, the real problems for business owners begins CFO service warned.
Entrepreneurs tend to have a false sense of security on this because they believe they will be able to convince CRA to rule in their favour by convincing them that they didnít intend to do wrong. Unfortunately CRAís auditors look at the situation without much emotion, and their sole job is to judge entrepreneurs and to figure out using facts if contractors should be considered employees. They will do a lot of due diligence as well as interviewing the business owner, the staff and even calling the business to determine who is an employee and who is actually contractor. Business owners will not have an opportunity to sway that auditors opinion, or to change their mind. The report will come back in the letter says CFO services, and that will be the end of the process. The business owner will have to pay not only a fine, but pay all of the source deductions that were missed retroactively for each person since the beginning of that personís employment plus interest plus penalties. The amount business owner has the potential to be assessed for can be very large. If the business owner has been doing this for several years, or has had several contractors.
The good news in all this is that if businesses have been making this mistake, it is a very easy and quick one to fix says CFO service. All you have to do is either switch contractors to employees and start taking the correct source deductions of their paycheck. Or they can ask those contractors if they would get incorporated. Either option the business owner chooses, will completely and totally eliminate the risk immediately. Any business owners who are concerned with avoiding this terrible situation can immediately take matters into their own hands and fix it. A great tactic they may want to use says CFO services is to wait until those contractors are due for a pay increase, and use the pay raise as leverage to make those changes.