Edmonton Small Business Accountant | Avoiding Payroll Remittance Problems
Edmonton small business accountant | avoiding payroll remittance problems many entrepreneurs are very excited when their business grows to be able to afford hiring employees says Edmonton small business accountant however, business owners should also be very aware of how they’re paying their employees in order to avoid making errors on their source deductions. If luncheon ignores make errors on their source deductions to CRA, the penalties can be huge and potentially threaten the business itself. There’s a few things that entrepreneurs can take into consideration when they hire their first employees and starts paying Canadian payroll tax.
First thing that entrepreneurs should remember when it comes to submitting source deductions to CRA, is when they are due. Edmonton small business accountant says the source deductions are due the month after the paycheck was issued, on the 15th day. Even though that is the deadline to send in source deductions, that doesn’t mean a business owner needs to wait that long. One of the best practices of paying source deductions, is for business owners to pay CRA at the same time that they are issuing employees paychecks. Not only will this be easy for the business owner to figure out, because they are already figuring out the amounts to the duct off of the employees checks. but it is a great way to ensure that business owners don’t forget when they have sent off that payment. If business owners are waiting until the 15th day of the month, there may have been more than one paycheck that needs to have source deductions sent in for, and it can get confusing for business owner to remember. It’s much simpler for business owners to send the payment at the same time their writing pay checks.
The second thing that entrepreneurs should remember when it comes to source deductions is how much source deductions they need to take. And then small business accountant says that many business owners always remember the employee CPP, EI and taxes that they have to deduct from their staff. But many business owners don’t know about the contribution they have to make themselves. There is also the employer CPP and EI that they have to pay out of their own bank account in addition to the amount they took off of their employees checks. That works out to about 7.4% of additional amounts they have to submit to CRA. Business owners who aren’t aware of this, will then create a shortfall in the amount of money that they are sending CRA. They may not realize they’re sending to little amount of money, until the file there T fours, when CRA will see how much they should have sent, and if they haven’t sent enough, then the business owners will be assessed.
Not only will business owners have to pay the shortfall amount says Edmonton small business accountant, the business owners will also receive a penalty, as well as potentially getting audited. The penalties and shortfall amounts to have to pay alone, could seriously impact the business and its cash flow, and it may be very hard for business to recover from.
One of the biggest problems that business owners face in Canada is running out of cash says Edmonton small business accountant. Half of all entrepreneurs will close the doors to their business within five years, and out of all of those failed entrepreneurs, 29% will say that running out of cash was the reason why they had to close their door. There are many reasons why business owners may run out of cash in their business, if business owners are running out of cash, one of the things that they should avoid doing is by avoiding paying the proper source deductions to CRA. Many business owners running into cash flow problems try to save money any way they can, and by avoiding sending payroll deductions is one of the more risky moves.
Not only does CRA strongly advise against missing paying source deductions, they actually view failing to pay the source deductions as a misuse of government money. Because of that, not only are they very relentless in their collection of the money that is in arrears, but there’s also severe penalties that go along with it. A business can face up to 20% interest of a penalty for source deductions that were not paid. That penalty can be incurred in as little amount of time as one day of missing a payment says Edmonton small business accountant. Business owners who are already running into cash flow problems, definitely cannot afford to have these massive penalties hit their business. It may be cheaper for a business owner to fund their business through high interest credit card and it would be to avoid paying source deductions as a way of increasing cash flow.
Business owners who are in risky businesses should understand that they are personally liable for their source deductions. Which means, whether the business has to close its door or not, the business owner and the directors of the company will be expected to pay that amount. To avoid having this impacted business to great degree, entrepreneurs may want to consider only having one of the spouses be a director in the company. The reason for that says this Edmonton small business accountant, is because Canada revenue agency cannot come after a spouse that isn’t a director. They may be able to mitigate some risk to the family, if only one of them is a director in the company.
There are many things that a business owner can do that can help them increase the cash flow in their business, avoiding paying payroll remittances is not an effective way of increasing cash flow, and is definitely not worth risking their entire business over. Business owners should see their accountant and learn how to appropriately plan in their business in order to mitigate cash flow problems, so that they can avoid running out of money in their business and avoid being into payroll issues with CRA.