Submitting Payroll Remittances To CPA | Virtual Accountant
One of the most important things that an entrepreneur can learn how to do as soon as they either start paying themselves a salary, or once they hired an employee says virtual accountant is learned how to calculate the appropriate source deductions and when those payments are due. The reason why this is very important because if an entrepreneur makes a mistake with either of these, they could find themselves being hit with a payroll audit. This can end up with an entrepreneur being assessed for significantly more taxes, as well as interest payments. Especially when entrepreneurs are brand-new in business, this may be too much of a burden for them to bear, and cause them to run out of money in their business.
When an entrepreneur is either taking a salary from their business or paying a staff, a virtual accountant says an entrepreneur needs to understand that both of those amounts are considered employment income. Business owners and all employees can receive employment income from the business. However, it is important that the entrepreneur keeps in mind that all employment income is considered an expense of the business and shows up on the income statement. Also, all employment income no matter who is receiving it is going to require source deductions being withheld from the paychecks and sent to Canada revenue agency.
If entrepreneurs believe that they are exempt from source deductions because they are the business owner, that could be very detrimental to their business, and cause them to underpay source deductions. Regardless of who is getting paid, if it is salary or wage, it will have source deductions withheld from the checks. Entrepreneurs also need to keep in mind what source deductions need to be withheld. It is not just the EI, income tax and CPP, but the employerís contribution to CPP as well as the employeeís contribution.
It is very important that an entrepreneur is calculating the source deductions properly says virtual accountant, because they may not get notified from Canada revenue agency that they are underpaying. As long as they are making their monthly deadline, Canada revenue agency will not tell them if they are underpaying. Only when an entrepreneur files their T4 slips on the last day of February, will Canada revenue agency see how much source deductions an entrepreneur actually owes. If they have underpaid, the best-case scenario will be for CRA to send them a letter requesting the amount owed paid in full immediately, however, the worst-case scenario will be that Canada revenue agency triggers a payroll audit.
By ensuring that entrepreneurs are calculating the appropriate amount of source deductions, and taking it off of every person who is receiving a salary or wages, an entrepreneur can ensure that they are paying Canada revenue agency the right payroll remittances, which can help them ensure they are paying the correct taxes so that they do not have to trigger a payroll audit that could end up costing them even more money.
Virtual Accountant | Submitting Payroll Remittances To CRA
It is not just enough for entrepreneurs to ensure that they are calculating the correct source deductions on time, says, virtual accountant. Business owners also need to ensure that they are meeting the payroll permit andís deadline, as well as filing their T4 and T5 slips on time. If an entrepreneur is paying the correct amount, but they do not get on time or submit their T4 slips, they could still trigger a payroll audit in their business.
Many entrepreneurs are not aware that there is actually a monthly deadline to submit their source deductions by. The virtual accountant says that that deadline is the fifteenth they have every month. All payrolls that are sent out in one month will have until the fifteenth day of the following month in order to submit payroll remittances to the Canada revenue agency.
However, virtual accountant recommends that entrepreneurs do not wait until the fifteenth day of the month to pay their remittances. The best practices are for entrepreneurs to ensure that they are submitting payment on the same day that they are running payroll. Not only does this virtually guarantee that an entrepreneur will never pay late, but it can also save significant amounts of time because an entrepreneur will already have been calculating the source deductions. And it can also eliminate errors, since an entrepreneur as already calculating the amount.
By submitting payroll remittances on the same day is running payroll can help entrepreneurs avoid paying late, and avoid making mistakes. By doing this, a virtual accountant says that entrepreneurs are significantly impacting and minimizing their chances of triggering a payroll audit with Canada revenue agency. Once an entrepreneur has filed their T4 slips and finds out how much they should have been paying throughout the month, if an entrepreneur discovers that they have underpaid, they should make a payment in that amount immediately, because they have until January 15 to catch up on all missed payments from the previous year.
If however, an entrepreneur is not able to afford to pay that amount in full and in cash, an entrepreneur should request help from their virtual accountant in order to help them reclassify the business owners income as a shareholder loan or dividend. The reasoning behind this is so that all of the payroll remittances that have been submitted to CRA on behalf of the entrepreneur can be reclassified for their employees. This may be enough for an entrepreneur to avoid having a shortfall on their payroll remittances.
By being careful to ensure that they are calculating their source deductions correctly, submitting pay all remittances at the same time as running payroll, and getting help from their virtual accountant to divert payments if they have underpaid can all help an entrepreneur significantly avoid getting hit with a payroll audit in their business that could negatively impact the cash flow in their company. Since a payroll audit can end up negatively impacting and entrepreneurs’ finances, they should avoid this scenario at all costs.