Edmonton Small Business Accountant | How To Minimize Payroll Remittance Problems
Any business owners who get behind on their payroll remittances, and end up being assessed with penalties can encounter huge problems that may be financially devastating to their business as Edmonton small business accountant. The penalties that are associated with missing submitting payroll remittances are huge, and should be avoided at all costs. Entrepreneurs can work with their accountant in order to create a plan to avoid this problem in the future.
Because late payments mean huge penalties says Edmonton small business accountant, business owners should be aware of when they are expected to submit their payroll remittances to CRA, and work to avoid paying late. If business owners are finding that they are having a problem with cash flow in their business, they need to understand that missing payroll remittances carries is such a serious penalty, that it’s not worth them missing this payment. The usual filing deadline for most businesses is on the 15th day of the month, and the month following payroll. So all payrolls that were run in a month, will have all of the remittances due on the 15th day of the next month. Some businesses that are small can submit the remittances quarterly, and very large businesses often have to submit their remittances twice a month, but for most parts entrepreneurs should know that there filing deadline is the 15th of every month. However, that does not mean that business owners need to wait until the 15th of the month in order to submit. Best practices when it comes to submitting payroll remittances, is for business owners to submit the remittances at the same time that they are running payroll. Not only is this faster as well is easier, because entrepreneurs are already figuring out remittances for their business, but business owners may also find that it’s easier to remember as well.
Once business owners know when they must submit their payroll remittances to CRA, they should also know exactly what they need to submit. Most business owners are aware of CPP, EI and taxes they must withhold from their employees paychecks, but they also need to be aware that there are employer contributions as well. The employer has to pay CPP, which is equal to the employee contribution, and employers also have to pay EI which is 1.4 times the amount that employees pay. This is the amount that business owners must pay from their own business, and it works out to 7.37%. If business owners are not aware that there is also a contribution that they must make, they run the risk of having a shortfall in their payments to CRA.
If there is a shortfall in the payments to CRA, they may notice this at any time throughout the year says Edmonton small business accountant, but if they aren’t aware of this throughout the entire year, they will notice that at the end of the year as soon as the business owner files their T4. Included in the T4 that they file, will be a list of all the of the remittances that a business owner should have paid as well as all of the remittances that they did pay. If there is a discrepancy, a business owner will be in trouble. Edmonton small business accountant says within 30 to 90 days, they will hear from CRA with a demand to pay the shortfall, as well as steep penalties of 20% interest per day.
When entrepreneurs run into cash flow problems says Edmonton small business accountant, they often try to get creative when it comes to creating that cash flow until they can bring more income into their business. Business owners should be aware that using payroll remittances as a way to do that is not only dangerous, but it could bring severe penalties that they may not to recover from. Since 29% of all failed businesses will say that running out of money was the reason why they had to close their business, creating cash flow in businesses is something that many business owners face, therefore they should be aware that using payroll remittance money to do that is not worth the risks.
CRA sees misusing payroll remittance money is an extremely serious events. A few the funds that business owners withhold from their employees checks as trust fund. It’s not their own money, and they are misusing it when they use it to operate their business. Therefore says Edmonton small business accountant, CRA is extremely aggressive and relentless when it comes to collecting payroll money that was not submitted on time. They also have very steep penalties associated with that. If a business owner is just one day late on submitting the remittances, they will be hit with a 20% penalty in just one day. That means if the business owner owed $10,000 of payroll remittances, by filing a single day late, they will then owe $12,000. That daily interest can add up extremely fast to an extremely large amount. Business owners should avoid this at all cost.
If business owners are in a risky business, they should set up their corporation in a way that only one spouse is the director of the company. This way, if they have a huge contract that ends up not paying them, and they owe lots in remittances that they can no longer pay, CRA will only be able to come after one spouse instead of both of them. This way, they may be able to protect some of their assets says Edmonton small business accountant. Since directors of the business are 100% personally liable for payroll remittances. Whether the business is around, or goes bankrupt, CRA will keep coming after the business owner no matter what until they no longer old payroll remittances.
By understanding exactly how serious penalties are for missing payroll remittances, Edmonton small business accountant says entrepreneurs can be prepared to ensure that their remittances are up to date, paid in full and paid ahead of time. Here at Spurrell and accountants we will do all we can to help you.