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Business owners should understand what the employer contribution of CPP and EI 7.37% mean. Edmonton small business accountant says this is the amount that business owners have to pay themselves the source deductions to the Canada revenue agency. Many business owners are not aware of the fact that they also have a contribution themselves to make. The amount is 7.37 is the newest rate that went into effect as of 2019. This is perhaps one of the biggest errors that business owners make when they are operating their business, is not calculating the source deductions they need to pay CRA in addition to the one that they take off their employees checks.
Business owners should also understand that besides employee CPP and EI, there are actually three other components of CRA remittances. The other components are the employer CPP and employer EI as well as taxes. By understanding that there are five components that need to be paid instead of just the three, can help business owners avoid making the error of not taking enough source deductions off their employees checks recommends Edmonton Small Business Accountant.
Entrepreneurs should also be aware of when most payroll remittances are due to be submitted to the Canada revenue agency. The due date is actually the 15th day of each month says Edmonton small business accountant. In the month that they paid in, is the month after the payroll was issued. For example if the payroll was issued in July, the remittance would be due August 15. By understanding when they have to pay source deductions for each of the paychecks that they run, business owners can stay organized and not miss a payment.
Business owners should also understand that there is a potential penalty for being just a single day late on submitting their remittances. That’s potential penalty is 20% interest that is payable after just one day. This is the CRA’s most expensive penalty says Edmonton small business accountant. The reason for that, is because CRA takes payroll remittances extremely seriously, and the hope that a steep penalty will keep business owners from making this mistake.
These are just some of the things that business owners can keep in mind when they are running payroll in their business, in order to avoid problems, and plan properly in their business.
Edmonton small business accountant has a favourite quote from Michael Gerber, who is the author of the E myth which says” the fatal assumption is: if you understand the technical work of the business, you understand a business that does that technical work.” business owners are often extremely good at what their business does, they are less knowledgeable about how to run their business, which can often end up creating problems for business owners. By helping business owners understand what they should do, and what they can avoid can help business owners learn how to operate their business effectively without running into problems that could negatively impact their business. For example, business owners who don’t know how to run payroll in their business can actually end up triggering massive penalties that will be difficult for their business to recover from. By learning a few things about payroll, not only can business owners avoid those problems, they can effectively plan around them and help them significantly in their business.
The first thing that business owners should be aware of when it comes to running payroll remittances, is how much they must collect from their employees and paid to CRA in order to avoid problems. Edmonton small business accountant says there are five components that business owners should be aware of in order to properly pay their source deductions to CRA. Those components are employer and employer CPP and EI, as well as income tax. Business owners must take the CPP and EI as well as taxes off of their employees checks, but they don’t always know that they also have to pay a percentage to CRA themselves in addition to the amount they take from their employees. That amount is 7.37%, as of 2019. If business owners miss this amount when they send their source deductions to CRA, they will be sending a shortfall and that could potentially land them in trouble with CRA if they don’t catch it soon enough.
Once business owners are aware of how much they need to pay in source deductions, they need to remember when they need to pay it by. Edmonton small business accountant says that although source deductions are always due on the 15th day of the month in the month after the payroll was run, business owners should not fall into the habit of paying their source deductions on the last possible day. The reason for this, is in case something goes wrong with the payment, or if the business owner forgets, that leaves absolutely no time to fix their error. What many business owners preferred to do, is to pay their source deductions at the same time that they are running their payroll. It works out perfectly, because business owners are already calculating the amount of source deductions that they need to pay, it makes sense that they just add them all together and send that check off to CRA at the exact same time. This way, it’s highly unlikely that a business owner is going to forget to send their source deductions. Also, if the business owner is unable to run payroll on a certain day, they are at least not going to incur a huge penalty for late payments.
