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E-Myth – “Why most small businesses don’t work & what to do about it”

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Virtual Accountant | Two Things An Entrepreneur Can Do To Avoid A Payroll Audit

It is very important that entrepreneurs learn very quickly in their new business what needs to get filed, and what the deadlines for those are said virtual accountant. By learning this quickly, they can avoid triggering penalties or late payments. This can help entrepreneurs when they are learning how to account for all of the money that has come out of their business for themselves to live off of, as well as pay their staff. By learning how to properly account for that information, pay taxes on it, and when it needs to be filed by can help entrepreneurs avoid triggering a payroll audit.

It is important that entrepreneurs account for all employment income salary and dividends in a T4 and T5 slip. A T4 slip is for all of the salary or wages of the entrepreneur and their staff and requires source deductions being withheld from their amounts. T5, on the other hand, is for an entrepreneur to record all the dividends that they are their shareholders have taken out of their business from profits. It is important to note that dividends are not taxable by source deductions.

Business owners should keep in mind that the filing deadline for T4 and T5 slips is the last day in February. Not only do they need to ensure that there filing their slips on time, but they have submitted the correct payroll remittances throughout the year as well. Canada revenue agency will see when an entrepreneur has filed the T4, if an entrepreneur has paid enough source deductions. If they have not and an entrepreneur does not fix it is by January 15, they will officially be late to Canada revenue agency.

This means, that the best-case scenario is that the Canada revenue agency will send the entrepreneur a letter telling them how much they owe, and for them to request payment in full immediately. However virtual accountant says that the worst-case area will be that this amount that an entrepreneur owes will trigger a payroll audit. If this is the case, an entrepreneur will have all transactions heavily scrutinized by an auditor, which could end up with an entrepreneur being assessed additional taxes and interest payments.

If an entrepreneur is short the source deductions that they owe Canada revenue agency, and they are unable to make a payment to catch them up financially, they should ask their virtual accountant to help them reclassify their income as a shareholder loan or a dividend, and hopes that the payroll remittances that a business owner has paid on behalf of themselves and then be reclassified as employees source deductions. This may be enough for an entrepreneur to avoid being shot.

An entrepreneur should avoid underpaying Canada revenue agency by efforts because being hit with a payroll audit can be significantly financially devastating to their business. By understanding Virtual Accountant that they can do in their power can help them avoid going through an audit. By learning how to file properly, and avoiding errors, can help an entrepreneurís impact their business.

Virtual Accountant | Two Things An Entrepreneur Can Do To Avoid A Payroll Audit

Even though entrepreneurs need to be very good at providing that product or service that their business offers says virtual accountant, that does not necessarily make them an expert at running their business. The author of the book the E myth has said it very well when he says: ìthe fatal assumption is: if you understand the technical work of business does, you understand a business that does that technical work.î Because business owners may not understand all of the various taxes and filing that they need to do in business, helping them understand that sooner rather than later can significantly help them avoid being hit with payroll audits that can end up costing them additional money in their business. Since 50% of all entrepreneurs fail 9% of those failed entrepreneurs say the reason audit failed was because they ran out of money, avoiding a payroll audit can help them stay cash flow positive.

If an entrepreneur has ended up filing their T5 or T4 slips late, or have not paid enough in source deductions, they may end up with a payroll audit. There is a few things that entrepreneurs should do in order to be prepared for a payroll audit. By doing this, they can perhaps avoid being assessed additional taxes. Virtual accountant says the first thing that they should do is go through their personal benefits to ensure that everything that they have taken out of their business has been attributed to their T T5 slip if they have anything additional that they have not claimed, they should attribute that there shareholder loan account for the auditor gets there. The reason why says virtual accountant is because it comes down to the credibility of the entrepreneur. If the auditor sees the entrepreneur has tried to be honest about the amount that they have not claimed, it will allow the auditor entrepreneur the benefit of the doubt, which can help them be more lenient when it comes to a grey area transaction.

The next thing that an entrepreneur should be prepared for is that the auditor is going to request the general ledger of the business as well as the monthly bank and credit card statements of the business. Not only are they looking at all personal benefits in order to find claimed amounts, but an auditor is also going to be reviewing the transactions to see if they have paid any people that should have been paid as employees with the appropriate source deductions withheld from their payment and submitted to CRA. Because of this, entrepreneurs that are hiring unincorporated businesses for services are putting themselves at risk. Since unincorporated businesses will get paid in their personal name, every time an entrepreneur has paid an unincorporated business, and auditor to assess this as staff. If that happens, an entrepreneur will have to pay source deductions for every one of those transactions plus interest.

Virtual accountant says entrepreneurs can simply avoid a payroll audit by ensuring they are filing their T4 and T5 slips on time, and that they are current source deductions. By doing this, an entrepreneur can significantly and permanently avoid payroll audits in their business.