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CFO services | Hiring Unincorporated Contractors
Business owners who have hired unincorporated contractors can be assessed by the CRA as having their contractors be deemed as employees says CFO services. Along with that report, comes a massive penalty, charged per employee for as long as the issue has been taking place. This can be financially devastating to a business, and has caused businesses to close their doors. Itís a very serious issue, but luckily itís a very avoidable one.
A lot of businesses continue to pay their employees like contractors, and theyíve been doing for such a long time but have never had a problem so they failed to see it as a problem. The problem is says CFO services is since it is a problem, when it catches up to them it will be catastrophic. Just because a business owner has been getting away with it, doesnít make it right. It will contain you to work for that business owner and what doesnít, and when it doesnít CRA is going to go back to the very beginning and make that business pay for each transgression.
So what penalties will that business have to pay for asks CFO services. Since that business owner has not been paying payroll deductions properly, CRA will make the business owner pay for all the CPP and EI deductions they should have been making both on the employer and the employeeís side. They will then Figure out how long that error has been going on for, and how many employees that business has that have not been getting deductions properly. Then the CRA will add interest to that and then they will add penalties to that. Depending on how many employees business has as well as how many years as employees have been working for the business, that number can add up to be a huge amount.
Luckily this is an extremely avoidable problem for all business owners says CFO service. All you have to do is avoid paying their employees as independent contractors if theyíre not. CRA has no problem business hires and CRA has no problem if the business hires an incorporated contractor. The only problem they have is if a business owner hires an employee as an unincorporated contractor.
Business owners need to know what considers an employee a contractor, and thereís several questions they can ask themselves to figure it out. In fact says CFO services, CRA has over 50 questions to ask in order to determine if that contractor is actually an employee. The questions are: how did the contractor get the job, who set the price – did the contractor tell you they would work for, or did the employer tell the contractor how much they would get paid, who is setting the work schedules who is training that person, is business owner responsible for arranging training, and are they getting training with the other staff members, or is that contractor responsible for getting their own training, can they hire their own replacement to work a job for them, what payments are they responsible for, do they have their own insurance or did they use the business owners, are they allowed to keep other clients.
Running out of cash is problem that one third of all businesses that failed gave as a reason for their business failure says CFO services. Trying to maximize cash flow is a problem that almost every single business owner runs into, and some business owners in an effort to save money, make some big mistakes. They hired on staff as independent contractors, and then had CRA later in them employees. Those retroactive payroll remittances plus penalties plus interest can either financially ruin a business, or create huge problems in that business. There are a lot more things that business owners should be spending their money on that being a massive, avoidable fine.
This is only a problem if the employer has created for themselves says CFO services. As far as problems go it is completely and entirely avoidable. The way to avoid it is to just not hire an incorporated contractors. Some businesses think that if they hire an employee and then call them contractor, they can save money on their payroll deductions. The problem with this is itís so much risk for so little game. The business owner does not have a lot to gain, and the risks can be financially devastating. If CRA does a payroll audit on a business, they will be able to find out very easily if the company has been hiring employees and calling them contractors, and if that is their determination, they will hit that business with the massive fine.
When CRA audits a business, their soul job will be to judge entrepreneurs so they take on this process without a lot of emotion. Many business owners believe they will be able to convince CRA to rule the way that they want them to rule, but this is actually rarely the case. CRA does a lot of investigating before they make their decision, often CRAís going to call the business and ask to speak to the people at the business in order to determine if they are in fact employees, says CFO service. They are going to do research, gather information, talk to the owner, talk to the accountant, and talk to each of the contractors. They have a list of 50 questions that will help them determine if that person is an employee or contractor, and will submit the report. They wonít even have to deliver the report in person, and if the business has been assessed as being at fault, the CRA is not just going to hit them with these four all of the current transgressions, CRA is going to make them pay retroactively the beginning of that personís employment. How many years that person has worked for the company, how many employees, plus interest plus penalties. This can absolutely financially ruin a company at the worst, and get the state company the best.