CFO Services | Hiring Mistakes To Avoid
Business owners often seek help too late to, for example after they have been devastated financially by retroactive payroll remittances include penalties and interest charges because contractors that are working for them has been deemed employees by the CRA says CFO services. This is not only a huge issue that is very fixable, is also problem that can be completely avoided from the very beginning.
Successful companies avoid this issue altogether by ensuring that when they hire independent contractors, the only hire contractors who have their own corporations set up. Itís a very simple hiring process and very easy to remember. Businesses that always hire employees with proper payroll deductions, or independent contractors with their own corporations never have to remember rules. it is a button step one rule process that can completely eliminate this problem for businesses moving forward.
A lot of the problem happened when business owners who have made this error in the beginning, continues to this problem in the business. they mistakenly believe that since they have been doing it that way since the beginning of the business, and have never run into a problem yet, they are free to continue to operate their business in this way without consequence. Just because they have a problem, doesnít mean they never will have one. The longer they do this in their business, the higher the eventual but these are going to be when CRA does find out. This is extremely dangerous thinking says CFO services because business owners will be expected to pay back those source deductions retroactively, meaning the longer this goes on other business, the more money theyíre going to eventually have to pay.
Business owners often also get lulled into a false sense of security thinking that even if they do get audited, they will be able to easily convince CRA to rule the way they want them to rule. Unfortunately says CFO services this is rarely the case. CRA auditors are very good at their job, which is to judge the entrepreneurs and their businesses, so auditors look on them with little emotion, and looking only at the facts. They will gather their own information, sometimes talking to the business owner as well as their employees, contractors and even potentially their accountant. They will ask huge amount of questions, trying to figure out for themselves if those contractors should actually be considered employees. Their entire full-time job is to be extremely judicious at who is deemed a contractor, because thatís how CRA collects the revenue. Itís a fairly quick and heartless process, does not give the business owner any opportunities to appeal.
Business owners should be convinced that if they have been doing this in the business, they really should fix it immediately. Luckily for them as a CFO service this is an easy problem to fix. All they need to do, as if they have a contractor who should be considered an employee, is that they start taking the proper source deductions of their paycheck. They may want to wait until that employee is due for a raise, and then they can use that to soften the blow that they will not be getting deductions of their check. Most employees will be happy at the prospect of getting a raise that they wonít care much that they now have to start paying taxes.
A massive problem that some business owners face that is completely avoidable says CFO services is business owners who have hired contractors in their business should actually be considered employees. This is a problem because businesses are doing, however the rewards never outweigh the risks, especially in this case. It is a completely avoidable problem that has very devastating consequences on the businesses that are found guilty of doing this.
The reason why this can be such a huge problem, is that business owners started doing this in their business, since they had never had an issue doing in this way, they tend to not believe that it is one. However the belief that it is not a problem because they havenít been caught yet is an extremely problematic thought because not only can it catch up to them, but when it does catch up to them it can be disastrous for their business. This is owners also often believe that they will be able to convince an auditor not to rule against them. CFO services says auditors rarely rule in favour of the business. Auditors are extremely judicious at who is deemed a contractor, because thatís how CRA collects their taxes.
The single most important factor auditors use in determining if the contractor is in fact an employee, is does that contractor have a risk of loss and profit? The two contractor says CFO services will actually have risk associated with what they do. If they get paid a flat hourly rate or a flat fee, if they never have to buy their own equipment supplies or material, they never have to buy insurance then chances are CRA will determine them to be employees. The less risk the contractor has, will mean the less likely CRA will see them as an actual contractor.
The second most important factor considering if contractors are employees, is how much control the business owner has over that person. Question is like can that person have other clients in addition to that employer? Can they hire their own replacement? Does the business owner require that specific person to do that specific job? How does that contractor get their training, are they expected to attend staff meetings? Less control contractor has, means the higher likelihood auditor will see them as an employee.
There are actually over 50 questions that auditors who asked not only the business owners, but their employees and the contractors themselves. The questions will help them determine if those contractors should be considered employees. Business owners need to be extremely aware of what CRA considers auditor if they are going to hire independent contractors. Of course we can completely avoid all issues by ensuring that all of their contractors are incorporated.