CFO services | how to avoid common payroll errors
If CRA does a payroll audit, and determines that if a business has made a mistake in treating their employees as contractors, says CFO services the penalties to that mistake loan can not only financially devastated business it can cause that business to close their doors entirely. Since 50% of all businesses close their doors within five years, and 29% of those failed businesses say that running out of cash was the reason why they failed, avoiding reasons that can cause business owners to run out of money can be a huge key to businesses success.
The reason why it is a problem to consider employees as independent contractors says CFO services is when employees considered an independent contractor, CRA does not get the taxes that they are owed. If the independent contractor has their own corporation, CRA knows that they will get paid on the taxes due. The problem happens when an employee should have source deductions in order to pay taxes, is treated like a contractor, they miss out on paying taxes and that does not make CRA happy. If the business gets payroll audited, and CRA determines that they have contractors that should have been deemed employees, the business owner will have to pay back all of those remittances retroactively. Depending how many contractors that business h in addition to having to pay all the source deductions retroactively, as, and how long they have been in business, that amount could be huge. , the business owner will also have interest charges on top of that payment and then CRA will add penalties to that. It can be a huge amount. Since most businesses have cash flow as weather issues in business, it is entirely possible to completely cripple business with this penalty. Business owners who try to save money by avoiding being source deductions are better off in the long run to pay those deductions and avoid this penalty.
Itís a very easy problem to avoid says CFO service. All they have to do is ensure that an independent contractor that they hire is incorporated. Any employee that they hire must have source deductions taken of the paycheck. With such a simple rule to follow in order to avoid such a massive penalty, there is no reason why any businesses should make this error. Most successful companies are able to avoid this issue altogether by having the same rules in place. As easy as this is to avoid, it is also that easy to fix says CFO services. Business owners who want to eliminate the risk in their business immediately they can switch contractors to employees by ensuring that those source deductions come off their paycheck. And if there are independent contractors that business owners want to keep as independent contractors, all they have to do is ask those contractors to incorporate. A contractor may not be thrilled to incur the cost of incorporation, however the business owner says that if a contractor does incorporate build raise, thatís an easy way around it.
Business owners who seek help only after they have been financially crushed by retroactive payroll remittances, interest as well as penalties because there contractors have been deemed employees by CRA says CFO services are asking for help far too late. It is much more beneficial for business owner to ask for professional help before they get a payroll audit. However business owners can easily avoid payroll audits in their business by following some very easy rules of thumb. The best and easiest rule of thumb that most successful businesses follow is that when they are hiring independent contractors, they ensure that those contractors have their own corporations set up. If that contractor is not incorporated, they will not hire them. Itís a very easy system to follow, and will allow businesses to completely eliminate the risk of payroll audits. Since businesses who hire contractors who are unincorporated take the risk on themselves, that CRA may deem those contractors as employees, smart businesses note to avoid the problem altogether by only hiring incorporated contractors.
If Business owners have already hired independent contractors that are either unincorporated or are should be considered employees, the fix is very easy. All they have to do is ask those contractors to become incorporated, and switch those contractors to employees by ensuring that source sections, with the check. It is really that simple so CFO services to avoid this problem in the first place
Business owners needs to know what happens if contractors are deemed employees said CFO service. If CRA deems those contractors as employees, business owners will always CRA for every single source deduction that CRA should have received. This is dating back to the beginning of that employeeís employment with the business. Not only did they have to pay all the code remittances, but there will be interest on top of that says CFO service, as well as penalties. This is such an avoidable problem that is easy to fix ahead of time, that there is no reason why any business owners should have this risk in their business.
CRA will figure out who will be considered an employee by asking several questions, the most important one being what is that personís risk of the profit and loss in the business. If that contractor has no risk associated with their job says CFO services, they are more likely going to be considered an employee. CRA will ask them questions like do have to pay for their own insurance, use or by their own equipment, did they get a flat hourly rate, did have to buy their own supplies. If the answer is no to most of these questions, chances are they will be considered an employee. The second most important question serially used to determine if contractors are employees, is how much control does that business owners have over that worker? The control business over has with the person, the more they are going to be considered an employee.