Edmonton Small Business Accountant | Paying Source Deductions
Accountants often hear from business owners that they are behind on their payroll remittances, and are being assessed penalties says Edmonton small business accountant. This can be difficult for a business to overcome, because the penalties can be so severe, but can be quite easy for businesses to avoid in the first place with proper tax planning, and also by understanding what they need to do in order to pay the proper amount of payroll taxes to CRA, and by avoiding falling into arrears with their payments. There are several things that business owners can do to ensure that this never becomes a problem for them.
One of the first things that entrepreneurs should learn when they have employees and start taking source deductions from their paychecks, is how much money they need to take off says Edmonton small business accountant. Business owners often know that they have to pay CPP, EI and taxes, but they don’t always know that they also have to send an additional amount of money themselves, for employer CPP and employer EI. This works itself out to approximately 7.37% in addition to the source deductions that they have taken from their employees checks. When they understand all of the taxes that they need to pay, business owners can plan properly and avoid underpaying source deductions tax to CRA.
Another way that entrepreneurs can run into trouble when it comes to paying source deductions, is not paying on time. Although entrepreneurs have until the 15th day of the month, the month after the paycheck was issued, business owners shouldn’t necessarily wait for that day in order to pay the source deductions. To even be a dangerous habits to get into, if a business owner forgets or is unable to pay on that day, that can trigger massive penalties. Edmonton small business accountant says a great habit to get into, is to remit the taxes to CRA the same day that the business owner is running payroll. Since they are already doing the calculations and issuing checks, it can be very easy for a business owner to send off CRA’s payment as well. This way, a business owner is less likely to forget to send the payment.
Business owners should know that they are 100% personally liable for payroll tax that is owed. This is whether the business is around are not says Edmonton small business accountant. This is an extremely serious situation, and business owners need to understand that CRA will not only issue huge penalties if a business owner has filed late, or has not filed enough, but they will also be extremely determined in collecting that money from business owners. CRA views this as one of the most serious infractions that a business owner can make. They view it as a business owner taking the money from their employees then instead of sending it to CRA, the business owner use that money to funds their business. Due to the serious nature of this, business owners should work very hard to ensure that they pay the right amount, and not best payments.
When business owners fall behind on their source deductions payments to CRA, Edmonton Small Business Accountant says this can mean huge penalties for the business, including massive interest charges, and potential audits. If business owners are running out of cash in their business, they should know that by paying their source deductions late, in order to help increase their cash flow is an extremely risky move, one that is definitely not worth the making.
Penalties for sending source deductions late, or sending the incorrect amount, is huge. Business owners can find themselves being assessed with up to 20% in interest charges before missed payments. The interest charge occurs after a single day. So even if the business owner is only one day late sending payroll tax to the Canada revenue agency, it can paying significant penalties. Business owners should take great care in avoiding missing payments. Edmonton small business accountant recommends a great way that business owners can avoid missing payments, is simply by paying their source deductions at the same time they run their staffs payroll. Even though the payment isn’t due until the 15th day of the month the month after the paycheck was issued, that may be risky move for business owners to wait that long before making payments. It can be far easier to remember to make the payment, by all of the payments at the same time.
Business owners should also keep in mind that the directors of the company are also personally liable for those payroll taxes that are due. Whether the business still exists or not. Because CRA takes such a serious stance on paying source deductions, business owners need to be aware that they should ensure that those payments get paid. In addition to being personally liable, business owners need to understand that CRA will be very determined when it comes to collecting those funds. They see it as a misuse of funds, and will do everything in their power in order to collect that money.
Business owners who are behind in their payroll tax should understand that as soon as they file their T4s, along with the T4s will be a list of all of the remittances they should have paid throughout the year in their business, and if the amount that they paid doesn’t match the amount they should have paid, that will trigger all sorts of problems from the CRA. Not only will they get assessed with penalties, CRA will start the process of collecting the shortfall, and the business could find that they are now facing an audit. This will happen within 30 to 90 days of the T4 being filed.
It’s not worth the risk or the penalties for business owners to file to little source deductions, or not pay on time. By knowing how much tax they need to to send to CRA, and when to send it, business owners can ensure that they never run into payroll tax problems.