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Edmonton Small Business Accountant | How Business Owners Can Avoid Payroll Problems
Canada revenue agency the use payroll remittance problems as extremely serious says Edmonton small business accountant. Businesses that collect money from their staff on behalf of the government, and then not give that to the government is viewed as an extremely serious infraction. It’s one of the most serious issues That CRA views as their most serious problem. Because of that, the penalties for missing a payment or having a shortfall on their payment is huge and fast. This is completely avoidable if business owners are aware of the requirements CRA needs in order to properly pay payroll source deductions.
One of the first ways that business owners can avoid problems when it comes to source deductions, is knowing how much money they actually owe CRA. There are actually five components to the CRA remittance says Edmonton small business accountant. Those five components are, the employer and employee CPP, the employer and the employee EI, and taxes. Three of those components are taken off of the employees checks automatically. The business owner needs to know that they have to deduct the CPP, EI and taxes appropriately from their staff’s paychecks. They also need to be aware, that they also need to personally pay from their own company the employer CPP and employer EI amounts. This works out to be roughly 7.4% in addition to the amount that they took off of their staffs checks. If they don’t know about these additional to amounts that they have to be personally, business owners can risk sending in a shortfall to CRA.
The next way to avoid problems, is for business owners to know what they their contributions are due. Edmonton small business accountant says that the 15th day of the month is always the due date for payroll contributions, and the month after the paycheck was issued is when business owners need to have their source deductions paid by. They get into the habit of always paying on time, they will be less likely to run into problems. However, Edmonton small business accountant recommends that business owners do not wait until the last day in order to pay their source deductions. By waiting for the deadline, business owners are opening themselves up for many potential problems. If they can’t get to their office or submit that payment on that day, they will be in big trouble. One of the best practices when it comes to paying source deductions for payroll, is actually to pay source deductions the same time that the business owner is running payroll. The reason for this, is since the business owner will already be calculating amounts to deduct off of the employees checks, they can easily figure out how much money they owe CRA and send all the checks at the same time.
When business owners understand what the requirements are when it comes to paying payroll, they can avoid making errors in either paying too late, or paying not enough in their source deductions to CRA.
Running into payroll problems doesn’t need to happen to businesses says Edmonton small business accountant. Payroll problems are completely avoidable with just a bit of planning. As long as business owners know what their requirements are when paying source deductions to CRA, they can be assured of avoiding errors, and avoiding the penalties that come along with that.
One of the first things that business owners should keep in mind when it comes to source deductions, is that the penalty for missing a payment or paying too little, is 20% interest charge. This is 20% over a single day. This is CRA’s steepest penalty says Edmonton small business accountant. Not only is the penalty huge, that business owners will have to pay the shortfall amount as well as the penalty and may even trigger a payroll audit for the company, which could be time intensive and difficult for business to go through. Not only is this a steep payment, that business owners should also be aware that they are personally liable for the payroll deductions no matter what. CRA views this as an extremely serious problem, which is why the penalties are so steep.
Entrepreneurs can easily talk to their accountant and create a plan in order to eliminate payroll tax arrears in their business says Edmonton small business accountant. There are a few things that business owners can do in order to effectively plan and avoid this problem, but also effective tax planning in their business can help them in a number of ways.
Business owners should keep in mind when there source deductions due date is, so they can pay before that date and avoid late penalty charges. Though source deductions are due the month after the paycheck was issued, on the 15th day, entrepreneurs should not wait until that date to make their deduction payment. Business owners should get to the habit of paying CRA early for a number of reasons. A great time for business owners to pay CRA is at the exact same time that they are running their payroll says Edmonton small business accountant. This can be easy, since business owners are already calculating source deductions, and writing checks. Figuring out how much to send CRA and then sending a check off can be very simple and easy to remember.
Once business owners know when they’re going to pay, they also should be prepared in how much they should be paying CRA says Edmonton small business accountant. Most business owners are aware that they should be taking off CPP, EI and taxes from their staff’s paychecks, but many business owners are not aware that they have to pay an additional contribution from their own business of 7.4%. If business owners are not aware of this, they can very easily have a shortfall at the end of the year, which can end up being penalized. By paying that percentage at the same time they pay their employees payroll remittances, business owners can be assured that they are not short changing CRA and will not get assessed for additional penalties.