CFO services | The Difference Between Employees And Contractors
business owners who donít of the difference between employees and contractors often run into problems after they have been crushed or about to be crushed financially by retroactive payroll remittances, penalties and interest says CFO services. The reason for this is because CRA these employees and contractors differently, when business owners do not hire incorporated contractors, they run the risk of the CRA deeming them employees. When that happens the business owner has to pay all of the payroll remittances that they missed since employee started. Business owners can completely mitigate the risk by either hiring staff as employees, or ensuring that they have been incorporated.
Often entrepreneurs made this mistake of begetting of their business, and since they have been getting away with it for a long time, they believe that they can continue getting away with it. However, the longer theyíre doing this, the higher the risk that CRA will catch them, and the longer theyíve been doing it means the higher amounts they will eventually have to pay. This definitely the situation where the reward does not outweigh the risk.
If business owners are caught, they should know how CRA is going to calculate what they will have to pay back says CFO services. Not only will have to pay all of the CPP and EI amounts that were missed since that employee started working, no matter how many years ago that was, it also have to pay interest on top of that plus penalties. Depending on how many employees a business owner has, and how long they have been in operation, this can be a huge out to pay, potentially crushing the business.
The easiest way that business owners can completely eliminate this risk from their business, is to either hire their staff as an employee, where theyíll have the payroll remittances deducted off their paycheck, or higher contractors who are incorporated. By ensuring that any independent contractors has set up their own corporations, business owners can completely eliminate this risk for their business. If business owners have already made this mistake, CFO services as this is an extremely easy when to fix. All you have to do is either switch those contractors to employees, and ensure that those payroll remittances, their check, or ask that there independent contractors incorporate themselves. This is often best done when those workers are due for a pay raise, there likely not going to be upset at the additional fees since they will be getting a pay raise.
This is a huge risk business owners are taking on the business if they donít know the difference between employees and contractors, however it is extremely avoidable as long as they put into practice hiring only incorporated contractors, or ensuring employees have proper remittances. CFO service says and fixing the mistake is that easy as well, business owners should ever be hit with this problem in their business as this is extremely easy problem to avoid, and penalties to severe.
Entrepreneurs often seek help, after they have been crushed or are about by retroactive payroll remittances, penalties and interest charges because because the contractors have been deemed employees by CRA says CFO services. This is an extremely avoidable situation, and if business owners have already made this mistake, it is extremely fixable.
Often business owners have made this mistake at the beginning of starting their business, donít realize that this is a problem, or donít believe that they will get caught. Often they have been doing it for such a long time, and have never been caught so they are lulled into a false sense of security thinking that they can continue doing so. However just because they got away with it, doesnít mean CRA wonít catch them. And the longer the business owner has been doing it, the higher the penalty is going to be once they are caught says CFO services. There is absolutely no reason for business owner to risk this extremely high penalty, as it can financially crush them.
Once the business owner has been caught, CRA will do an audit of their payroll, and their soul job will be determining who is a contractor and who is an employee. It will be extremely judicious in the process and is deemed a contractor, because that is how CRA collects their taxes. They will do research, interview the business owner, their staff, and contractors. We may even call the business asking to speak to specific people in order to figure out it was a contractor and who is an employee. Once they make their determination, they will send the report in, and a business owner would have an opportunity to appeal the process. Many entrepreneurs believe that they will be able to convince CRA to rule the way they want them to, this is actually very rarely the case says CFO service.
The two most important factors when CRA is determining who is contractor and who is an employee, the first most important question the will answer is whether or not the person that is been called contractor has any risk of profit and loss in the business. Does that person ever have to buy their own equipment, by supplies, bid on jobs, or will they only use the business owners equipment, supplies and get paid an hourly rate. The most important factor CRA will look at making the decision is how much control the business owner has that person says CFO services. Can a person hire their own replacement, or does the business owner require that specific person to do that specific job? Does the business owner expect them to keep regular hours, attend staff meetings? The more controlled business owner has over the person, the more likely CRA will deem them an employee.
Business owners should be very aware of the differences between employees and contractors when they are hiring their business, ensuring that employees get hired on properly, including people remittances of their paycheck. In order to ensure that CRA will never been a contractor employee, a very simple fix is business owners should ensure that all contractors have their own corporations.