Edmonton Small Business Accountant | Minimizing Payroll Remittance Issues
Payroll business is not a significant activities as a small business accountant, however if businesses do not run payroll correctly, and remit the proper source deductions to the Canada revenue agency, they can huge penalties as well as the risk for being audited. Business owners should learn early on in their business, what they need to do in order to properly pay CRA their source deductions to avoid penalties which could be very financially devastating for their business.
The first thing that business owners should take into consideration is learning how much money they need to remit to CRA. Most business owners are aware that they have to take CPP, EI and taxes of their employees paychecks. However, business owners are less knowledgeable about the fact that they must contribute themselves to their CRA remittances In addition to the source deductions they have collected from their employees. The amount that they must pay, is 7.37% added on top of their source deductions. If a business owner is not aware of these amounts they must remit to CRA, they will risk being hit with the penalty at any time, and if they have been hit the penalty by the end of the year, as soon as an entrepreneur files there T4s CRA will be able to see very easily the source deductions that should have been paid throughout the year, and how much has been paid. If there is a shortfall, CRA will be able to issue penalties to the business owner. The Penalties will include having to pay the shortfall immediately, as well as a penalty that could be up to 20% interest of all of the shortfall that the business owner owes. In addition to that, CRA may demand a payroll audit.
The second thing that business owners should keep in mind when they are learning how to run payroll, is when those businesses are due. Most payroll remittances are due to be submitted to the CRA by the 15th day of every month. Whatever month the payroll was run in, the business owner has until the 15th the following month in order to submit remittances. If a business owner is even a single day late, this can trigger huge penalties by CRA. The potential penalty is up to 20% interest on the remittance amount that is due. Depending how big that remittance amount is, this could be a huge amount of money for business that they may not be able to recover from. Even if they can recover from it, that is certainly money that a business owner does not need to be paying. Edmonton small business accountant says cash flow is enough of a challenge for business owners, that they do not need to incur more.
I understanding what their requirements are when it comes to payroll and CRA remittances, business owners can you plan there business around how to pay the source deductions properly to avoid incurring any penalties.
Business owners who are unaware of what they need to remit to CRA for source deductions can end up with larger problems than they ever anticipated says Edmonton small business accountant. They will find that if they have any issues, CRA will help them with massive penalties, and will be very aggressive in collecting the money that they owe. The reason for this is because CRA is very serious about when business owners do not pay the correct remittances, and instead use that money to operate their business. They essentially view this as an abuse of trust funds. Business owners taking money on behalf of the government, and then using it in order to operate their business. Because they have such a serious view of this, CRA is extremely serious and harsh when it comes to issuing penalties on this. The idea behind that says Edmonton small business accountant, is that business owners should avoid making these errors because the policy is so severe.
Since cash flow such a huge problem for most businesses, some business owners may be tempted to collect the remittances, and then use them to increase their cash flow until those source deductions are due. This is a huge risk says Edmonton small business accountant, because if the business owner is unable to generate positive cash flow using that money, they will risk not being able to pay that money to CRA by the due date. If they miss pay their source deductions even by a single day, business owners can be assessed up to 20% interest penalty, which is CRA’s most steep that the issue. Business owners should also consider that if that’s what they need to do in order to generate positive cash flow in their business, that they are in a lot more trouble, and they should see their accountant in order to come up with a plan that adequately addresses their immediate needs.
Edmonton small business accountant says business owners should also take into consideration that they are actually hundred percent personally liable for source deductions they owe CRA. So even if their business fails and they go bankrupt, it will be on the hook for that amount. That may be enough of a deterrent to keep businesses from behaving risky when they are dealing with source deduction amounts. Business owners can protect themselves somewhat when they start the corporation to avoid issues like this, by so that their spouse is not a director of their company. The reason for that, so CRA can’t come after that spouse if things go wrong in the business. This may be a way to mitigate some risk, to be sure that the entire family does not run into problems if a business owner is not able to pay back their source deductions that they owe CRA.
Business owners should be aware of all the risks of not paying the source deductions correctly in order to use set up their company in such a way to avoid these issues before they happen. We want more than anything to help!