CFO Services | Payroll Remittance Problems
One of the largest and most avoidable errors business owners can avoid when they are starting to hire people in their new business says CFO services, is that they hire employees, but consider them independent contractors, in order to avoid paying taxes. The reason why this is a huge mistake, is that CRA has specific rules place on who is considered an employee who is considered a contractor, and they are not a fan of missing out on getting the taxes they are due.
Hiring an employee business is no problem, when a business owner properly deducts the right deductions from their paycheck, and of the business owner is going to hire an independent contractor, they can ensure that they donít run into issues by making sure that contractor is incorporated. The only risky behaviour is when the business owner hires an independent contractor who is not incorporated says CFO services. Since the business owner is responsible for ensuring that the people who work for them are legitimate, hiring a contractor that is not incorporated falls to the responsibility of the business owner.
CRA has several rules that they use when they are determining if that contractor is actually an employee, and the two biggest determining factors says CFO service is how much risk that contractor has, did they send to profit, and to they have a potential of loss as a contractor. The next most important factor is how much control does the business owner have over that person. The more control business owner has, the more likely they will be considered an employee.
Another risk factor on whether or not CRA will have a problem with the contractor, is how much that contractor has been getting paid and how much theyíd been working. If theyíd only worked a few times a year and had only been paid a few hundred dollars, itís likely to be seen as less of a big deal then a contractor who works daily gets paid several thousand dollars a year says CFO services. The more pay, the more risk.
Once a business receives an audit, business owners will not have an opportunity to try to convince CRA to will the way they want them to. CRA will be investigating, and doing their due diligence themselves to satisfy themselves that the people deemed contractors in the business are in fact contractors. They will speak to employees, the contractors and cells, even the businesses accountant, to figure out for themselves who is a contractor who is an employee. Once theyíve made their determination, the report will come back in the mail, and the business owner will be hit with a fine if theyíve been found guilty says CFO service. In this amount that they have to pay will be huge, and not debatable.
The good thing about this is business owners can completely avoid this risk by ensuring that there are independent contractors are incorporated, and by ensuring that their employees have the right source deductions taken off their checks. If business owners are currently making this mistake in business, itís also an easy want to fix.
A mistake that business owners can make in their business when they are hiring staff says CFO service is hiring employees as contractors. This is a easily avoidable mistake and one that business owners can figure out before I make it by asking a few questions.
The first question business owners can ask is what is the difference between a contractor and an employee says CFO service. The biggest differences between an independent contractor and an employee says CFO services is how much risk they have in the business. The independent contractor will be seen as a legitimate business person who runs the risk of profiting, or losing money in their business. If there is a potential that a contractor could lose money, that often determines whether they are considered a contractor. Do they have to pay their own bills, did have to buy their own equipment, did have to pay their own insurance? These are all determining factors to whether there is a potential to lose money. How did they get jobs, do they submit bids, do they set their own prices?
The second most important difference that helps determine if employees a contractor or not is how much control a business owner has over that person – Asks CFO services. Are they able to hire their own replacement if they canít come to a job site, or does the business owner require that specific person to do that specific job? Are they responsible for arranging their own training, or do they get trained with other staff members? Are they expected to show up for staff meetings, are they able to see their own clients? The more control a business owner has over that person, is more likely they will be determined employee.
The reason why this is such a huge problem says CFO services is if CRA is not getting the taxes that they paid, they can audit business and assess that business with an amount that they have to pay. If CRA has determined that a business has been incorrectly calling their employees contractors, they have the potential to be assessed for having to pay back the source deductions since the beginning of that personís employment in their business plus interest plus penalties. There is the potential for business owner to have a huge fine at the end of the day. This could be financially devastating to the business, and may even cause that business to close the door.
For all of these reasons business owners need to be very careful when they are hiring staff in their business, a good rule of them is if there hiring an independent contractor, to always ensure that they are incorporated, to avoid being hit with retroactive payroll remittances. For business owners who are currently making this mistake, it is an extremely easy fix, all they have to do is switch those contractors to employees and start deducting from their check.