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Edmonton Small Business Accountant | Avoiding Payroll Tax Problems
Many small business owners aren’t aware of all of their requirements when they are remitting source deductions to CRA says Edmonton small business accountant. As a result, they make fatal errors that can hit them with huge amounts of interest and penalties, which can seriously inhibit their businesses cash flow, and may end up ending that business. There are easy ways to avoid this issue in businesses, as long as business owners know what they need to do to avoid any errors.
One of the first things that business owners should be aware of when it comes to source deductions, is how much they need to take from their employees and for what. Edmonton small business accountant says that most employers are aware of the employee CPP and EI as well as the tax that they must take off of their employees checks, but many business owners aren’t yet aware of the contribution they must make to CRA themselves In addition to the amount that they deduct from their employees. They have to pay employer CPP as well as employer EI and both equal about 7.37% of the total amount of source deductions from their employees. By understanding that they have to pay all five components of CRA remittances, can encourage business owners to pay properly from the very beginning. If they have a shortfall, they could be hit with penalties.
The next thing that is very important for entrepreneurs to be aware of as they are paying their source deductions, is when they must pay them. This is one of the most important things, because even by being one day late, a business can be hit with significant penalties says Edmonton small business accountant. To avoid being late, business owners should come up with a strategy of how to pay their source deductions in a way that is easy to remember and will have them completely avoiding a late payment. One of the recommendations is for a business owner to pay their source deductions on the same day that they run their payroll. Not only is this very easy for a business owner to remember, but it’s also easy to pay, because business owners are already calculating the source deductions that they are taking off of their employees checks, it’s very easy to figure out the entire amount they need to pay and then simply pay it. By paying very early, business owners can be assured that they won’t miss paying, or risk paying late.
It’s very important that business owners avoid these errors, because the penalties for late or missed payments is huge, up to 20% says Edmonton small business accountant. This is a massive amount of interest that a business owner definitely can do without paying, especially since most businesses risk running out of cash in their business. By being knowledgeable ahead of time, and paying the appropriate amount of remittances well in advance of the due date, business owners can steer clear of any problems that may plague them
Many businesses are not aware of what they need to do in order to avoid running into problems while paying source deductions to Canada revenue agency says Edmonton small business accountant. If business owners can learn right away what they should be doing, and what they should be avoiding, they will be able to easily avoid all of the problems that could potentially devastate a business who isn’t aware of how to pay source deductions in their business. Since 50% of all Canadian businesses close the doors to their business within five years, and that almost 30% of those failed entrepreneurs will go on to say that running out of cash was the reason their business failed. They shouldn’t add being hit with interest charges is one of the reasons why they ran out of money.
Business owners need to know how much money they should be paying to CRA. It seems like the simplest thing for business owners to make an error on, but many business owners are not actually aware of all of the various payments they must pay to Canada revenue agency says Edmonton small business accountant. There are actually five components of CRA remittances. The first three are the most well-known, they are the employee CPP, the employee EI taxes. Those of the most common and well-known remittances, because they are deducted off of every employees check. However the other two, are less known. The are, the employer CPP and the employer EI. This is the contribution that the employer must make themselves to CRA. They must contribute 7.37% of the overall payroll amounts to CRA. It is the most current amount, it recently just increased in 2019. By knowing how much they have to pay, business owners can be sure to the current amount and avoid running a shortfall their remittances.
Other than knowing how much money they must pay, the next most important thing is knowing when they have to pay it by says Edmonton small business accountant. Although business owners have until the 15th day of the month in the month following when the paycheck was issued, business owners should not wait until that day to submit their payment. The reason for that, is because if they forget, or missed a payment due to a variety of reasons, they will be immediately hit with up to 20% of interest charges that are incurred after one day. That is a very steep and severe penalty, the reason why CRA has said steep penalties, is to keep business owners from making this error. Not only will CRA hit business owners with a huge penalty, they will also be very aggressive in collecting the shortfall.
By knowing what to avoid, and how to pay source deductions properly, business owners can be assured that they are avoiding running into issues that could potentially be devastating to their business. we would absolutely love to help you with your business but first, you have to be the one and take the next step by reaching out to us.