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Helping Canadian businesses beat the odds!
Helping Canadian businesses beat the odds!
Hi there, and welcome to another edition of ask spurl CPA. Today we’re talking about the t four and t five filing overview and I have me here with me once again to help me, you know what I mean as a firm. And last time we heard all about how uh, you know, she graduated from nate’s with an Edmonton Accounting Firm degree and she was a member of the accounting club, you know, great resume. And then tell me what you came in, you applied to our firm and what happened?
Uh, the first time I came I passed the interview. Everything went through however an opening, so I did not get hired so I never gave up. I continued, I saw the opening again and I came back
right on. So all of you, whether you’re looking for a job out there or you have a business out there, you know, the key thing is, you know, you, you have to keep trying. We have to be diligent and especially in today’s Alberta Economy, um, you know, a, you know, it’s easy to apply somewhere once and it doesn’t work out. Um, and then to give up for, you know, it’s easy to, you know, try to sell your product or business as a, as a business owner and it doesn’t work out and give up, but you know, he got to keep going. So that’s why May as part of this team for sure. So the quote that I have in terms of the t four and t five filing overview, Edmonton Accounting Firm, so from Michael Gerber, you know, the, the fatal assumption is if you understand the technical work of a business, you understand the business that does that technical work.
So I mean just because you’re a good dentist or dry or probably doesn’t mean that you know a lot about filing your t four and t vice, which is necessary if you’re running that sort of business and the statistic you don’t. One of our favorite statistics is 60 percent of all small businesses go out of business. And one of the top three reasons that that happens is that they run into cash. And you know, the story that we’ll have is business owners who haven’t filed or Edmonton Accounting Firm or they haven’t filed a key force or advise properly, they triggered a payroll audit and now all of those gray area transactions that they wanted to keep it under the carpet, they’re going to be brought up to the forefront and they’re going to get scrutinized. So maybe what are the questions that these business owners should be asking in terms of
generally what amounts need to be recorded on tape,
so money that is coming out of the corporation for personal benefit or non cash personal benefits that are coming out of the corporation, whether it’s coming up for owners or whether it’s coming out for employees, those are generally going to have to come out in the form of salary which results in a t four or dividends which results in a [inaudible]. So again, money that comes out of the corporation or non cash benefits that come out of the corporation, they’re going to need to be recorded on either Edmonton Accounting Firm, t four or t five.
what is the difference between the two?
So t four know relates to wages or salaries, so it’s employment income on t four and either a owner of a corporation or a, you know, arms length employee of incorporation can get a salary or wages or employment income out of a corporation. T fives on the other hand, these are the dividends from a corporation. So dividends are only paid to the owners or shareholders of a corporation. So those results in a t five. So again, employment, income t dividend on a t five. Also, it’s important to note that employment income, the income, it’s an expense on the corporate income statements associate ducted on an income statement. Edmonton Accounting Firm it’s directly removed from the retainer. And so it’s direct profits being rude, they don’t show up on the income statement. So a slightly different there, but those are the differences between [inaudible] and [inaudible].
When did these t4 and t5 slips need to be filled?
Both of these returns, they need to be filled out and filed in February. So at the end of February there, do you have to follow your t four Edmonton Accounting Firm by February 28th and February 29th on a leap year. Um, and you gotta you gotta get them into Cra.
Are there any source deductions or payroll?
No. P a t five. I don’t have a source deductions. So it’s just the employment income that has source deductions where you have to be sending in a, the remittances off of each check. So are are slightly different. Um, we don’t need to be sending in any source deductions for Edmonton Accounting Firm what are the deadlines to submit payroll women’s to cra, 44 and now mostly
small businesses like almost if you’ve crossed certain thresholds, you’re going to have to remit more frequently, but most small businesses have to submit their payroll amounts each and every month. And what they have to do is by the Fifteenth Day of the following month, the month following where the money was taken out of the corporation. That’s the payroll remittances for that. So the money that was taken out in January, the payroll remittances have to be submitted by February 15th. And the money that’s taken out in February, the payroll witnesses have to be submitted by March 15th. No, not always agreed deadline to reach to the last second to do that. Uh, but that generally is a deadline. And then it’s important to realize that there’s a very important submission in January where it’s, you know, it’s your last opportunity in gen in January. I’m usually by the 15th to submit any payroll admittances for the prior year. So anything submitted by January 15th, you know, it could be, uh, used to apply against the prior year, whereas anything after January 15th, it’s either late or it deals with the next year.
And upon filing your teeth, how does cra know if you paid enough source deductions?
Yeah. So the t force, they’re going to total up, you know, what was the CPP taken off of each check. And of course the employer contribution has to match that. And then what was the Eei removed off of each employee’s check? And then what was the employer contribution is, it’s a set rate based on that. So it’s Times one point four. And then what’s tax taken off each check, then they’re going to add those five items together because it’s reported on that at all. The t four. So you follow the Edmonton Accounting Firm along with a t four summary And it lists the CPP removed from checks, the CVP that the employer should have kicked in the Eei room from checks the Eei at the employer should have kicked in and the tax removed and checks. And that’s going to have total, these are the total remittances that should have been remitted. And that comes with a keyboard. Then they’re going to compare that against the total remittances that you actually submitted. And now they’re going to know you submit enough payroll remittances, or are you short for the year?
If CNN has concerns with these amounts, what sort of audit will be
trigger? It’s called a payroll audit. So usually, you know, in a, in a better case scenario, little set it in your, you know, your short. And maybe they’ll send you a bill st pay that’s been, in a worst case scenario, a, they’re going to trigger a payroll audit. Um, and that’s where they’re going to look into and seed, hey, where the proper paper was there a t forest [inaudible] issued a for all of the circumstances that there should have been, um, or the, the extra key for amounts. Is there extra remittances that are now old.
What are the two main functions that will help happen in a payroll audit?
So what’s gonna happen in a payroll of the payroll auditor is going to come in and they’re going to ask for generally the General Ledger and the bank statement and they’re going to start with the bank statements. So they’re literally going to go through all the bank statements and they’re going to see what amounts went out to people. They’re going to start with people. So if you paid, um, you know, your, you, you paid your cleaning service and it’s a smith cleaning services inc. No problem. That’s the parallel auditor is goiNg to exclude that one. But as soon as you pay that amount to John Smith, even if he was your cleaner, they’re going to start to question, is this person an employee? Is this person that contractors should. We issue to t form out to them, so they’re going to total up all those amounts issued a to employees and they’re going to compared to what the t four is, Edmonton Accounting Firm are actually filed.
So that’s function number one, they’re going to go through all the bank statements and identify all the amounts that are actually paid to individuals rather than companies. Um, and Then determine have we issued the force and every case that we think is necessary. And then number two, they’re going to assess all of the personal benefits. So what are the personal benefits usually of the shareholder, um, because it’s not just cash that’s removed, you know, did the company pay for expenses that had a rather than a business purpose but more of a personal benefit for the shareholder? And are those personal benefits also included in the t for amounts and if they’re not in the t four months, was there t five amounts that it flow through the shareholder loans? So, Edmonton Accounting Firm and what are the two main things you can do to avoid a payroll on it?
Number one file at a time. So even if you’re a little uncertainty, even if you’re short on funds, you want to file on time, number two is you actually want to payroll, you pay your payroll, remittances on time. So if you’re late, those are generally the two things that are going to be a problem. So, and again, if you, if you don’t file it, if they’re going to find out in february where you filed because it’s not going to match what you paid for last year. So you want to file on time and pay your payroll or mittens as long time, you know, that’s going to just prevent having to go through all of those, you know, uh, items that are maybe a little more subjective and a little more grade, you know, they’re not always black or white on how they should be treated. But you know, generally if you file on time and you pay your apparel men, sometimes there’s a better chance that no one’s actually going to look under that. Matt,
if you have a sharp pain that remain sport employee, is there anything you can do
now? Sometimes you short pay their menses for employees. And let’s say you’re short on funds and you, you, you, you can’t, uh, you can’t overcome that in the short time short term. So sometimes you’ve paid a payroll menses for the employer as well. So basically for the shareholder also has, you know, a, a t four that was supposed to be declared sometimes there the ability to move that t four income and reclaim it as either a cheryl the loan or dividend income. Now it means a lot if you didn’t make any formal declarations throughout the year, but it was just money removed by the shareholder and you know, it was contemplated that it might be salary and you paid payroll admins is on that. Um, sometimes there’s ability that you can, you know, reclassified as a, the loan or dividends because it wasn’t really classified to begin with. Edmonton Accounting Firm that means some of the payroll remittances that you paid for the owner can be applied to the employees because there’s no chance to reclassify the employees that their t four has to be done. So sometimes there’s the ability to use a payroll witnesses that were paid for the owner because it was contemplating that t four, it might be declared for them, but instead of being applied against the, the employees and finding a different mechanism to pay the owner,
why should you assess personal benefits prior to a payroll audit?
So, Edmonton Accounting Firm, now we’re in the scenario where, you know, we’ve done everything in can we file on time or you know, we paid our payroll sometime we have a payroll audit anyways, or hey, we didn’t get on that train quick enough and we’re going to have this payroll audit. You want to go through necessity, your personal benefits, uh, and it comes down to credibility. So you don’t want to be sitting there in front of the auditor and saying that, uh, you know, my, my $12,000 trip to Jamaica was a 100 percent business expense and had no personal benefit on it. Or I have this company truck and it’s the only vehicle that me and my family owned a. But I have no personal benefit from it whatsoever. So we have to assess these personal benefits in charge, he’s personal benefits to the shareholder via the shareable alone before the payroll auditor comes and we want to go through it because if you haven’t done that exercise at all, now the auditor knows that you haven’t done that exercise at all and then you try to make the argument that they are 100 percent and with zero personal benefit and you just lose all credibility.
So now they look at everything, even the things that you know might Be a little bit out of the ordinary, but that’s really just the way your business a existed. So, you know, maybe you had to do a three conferences for your business, but you know, you failed to identify that there was any personal benefit for the vehicle in the business. So now they’re, you know, why would they, why would they not challenge you on the other one when you’re clearly being unreasonable in one area? So it’s really important to go through and establish what those personal benefits are and charge those personal benefits to the shareholder alone. Prior to having the payroll audit and looking to see that in the payroll auditor, look at it because then it shows them that, yeah, you tried in good faith, you know, you’re, you’re trying to, Edmonton Accounting Firm, you’re, you’re being reasonable about those personal benefits are, and they’re more likely to maybe cut you a break and some of the other areas and more likely to take your, your assertions at face value. Um, yeah, so I think that’s what we have here today in terms of a t four and t five filing overview. As always, you know, please leave any comments below and we’ll address a, anything you have in any future videos and hit the subscribe button. If you want any future tips for helping you run your business. Thanks very much.