Many consider payroll a straightforward process. However, there is far more to it than just paying your employees. There are many additional tasks and duties attached that can get businesses in costly trouble with the CRA if not done properly or on time.
Late Remittance or Payment of Payroll Tax
Federal and provincial tax agencies set specific remittance dates by which you must file and pay your payroll tax deposits. These dates are determined through a combination of your estimated annual gross payroll and total taxes remitted the prior year.
Missing these deadlines can lead to significant penalties, increasing with repeated late remittances within a year. The base penalty is 10% of outstanding payroll taxes, which rises to 20% if it is a second time. Additionally, you will be charged a high prescribed interest rate (6-10%) on all outstanding payroll taxes and penalties backdated to when the remittances should have been made.
Depending on how much later you file, these penalties can be significant.
Employers Do Not Calculate Source Deductions Correctly
One widespread mistake business owners make is not correctly calculating source deductions from employees’ paycheques. If the failure to withhold affects deductions such as tax, CPP, EI, or similar, you are liable for penalties and interest. Additionally, discrepancies may flag your account and lead to more audits in the future.
Employers Do Not Pay Their Employees on Time
This one should go without saying, but not paying your employees on time can have severe repercussions on several levels. Timely payment is a legal requirement, but it is even more crucial for employee morale and trust. While this may not result in penalties, it should be one of the highest priorities.
Employers Do Not Issue Record of Employment to Employees Who Resigned or Terminated
When an employee resigns or is terminated, issuing a Record of Employment (ROE) is mandatory. Failure to provide this document can severely impact the employee’s ability to receive government benefits such as Employment Insurance (EI). The ROE will also help determine the EI benefit amount and how long the individual will receive those benefits and ensure they are not received in error.
An ROE must be issued within five days of the employee’s last day at work, and delays may result in penalties and/or damages.
Employers Do Not Issue T4s Correctly
The T4 slip is critical for Canadians to file their income tax returns so that any mistake can have potentially severe consequences. Most will check the income tax and contributions to CPP and EI, but if there is a mistake in the calculations, they will likely only notice once they receive a notice from the CRA.
Among the most common mistakes are the incorrect calculation of taxable insurance benefits and health and wellness spending; the same goes for commission income, vehicle allowances, or other bonuses.
How to Avoid These Payroll Mistakes
Given the complexities of payroll tax law, it can be easy to get caught up in other business activities or miss a change in laws and regulations. Among the solutions to avoid payroll mistakes are investing in reliable payroll software that can automate calculations and automatically stay updated with tax regulations, clear procedures and timelines to process payroll and remit all associated taxes, and providing regular training to any HR personnel involved in payroll processes and compliance.
Or you could outsource your payroll to a professional payroll services company like Stratos Accounting & Consulting. Our experienced CPAs can handle all aspects of payroll processing, including calculating employee wages (factoring in overtime and bonuses) and accurately deducting taxes, benefits and other withholdings. Whether it is payroll distributions, employee benefits administration, or tax reconciliation and compliance, our experts have the expertise and experience to take the burden of payroll off your shoulders to allow you to focus on growing your business.
Payroll Services for Mid-Sized Businesses
Payroll taxes are an often overlooked aspect of a company’s finances, and mistakes can lead to costly penalties. They require accurate source deductions, diligent record keeping, compliance with government agency-set deadlines for filing and remittance, and more. At Stratos Accounting & Consulting, we are committed to providing businesses with the expertise and support needed to thrive in today’s competitive landscape.
Stratos Accounting & Consulting is your professional choice for dedicated, personalized, customized services. We strive to provide our clients with exceptional customer service and always be available to answer questions and provide guidance. Our team of experienced professionals works closely with our clients to understand their unique needs and objectives and develop solutions tailored to their specific situations.
Our company is built upon five pillars: Integrity, Professionalism, Respect, Quality and Transparency.
Stratos Accounting & Consulting is a proud QuickBooks partner. We use QuickBooks Online to ensure the quality and security of your financial information. QuickBooks Online lets you see your whole business finances in one convenient place on the cloud, updated in real-time.
Contact Stratos Accounting & Consulting today at 416-477-4775 or fill out our convenient online form to learn more about how Stratos can help your business soar.