Taxation – Small Business and the CRA (Continued)
Small Business and the CRA (Continued)
Failure to file is a big mistake.
Failing to File
When cash resources are not available, whether to remit payroll deductions, income tax or HST, owner-managers may decide not to file the required return. BIG MISTAKE. Better to file on time, even if the business does not have the cash flow to make the required payment. Late filing incurs penalties and interest. Filing on time without payment will probably not incur penalties but will incur interest. Additionally, the CRA is open to establishing a payment schedule as long as you contact them with a proposal before the payment deadline.
Payroll is a business’s biggest expense and involves more than just writing a cheque or depositing money in the employee’s bank account. Payroll requires calculation of source deductions, the employer’s share, vacation pay, WSIB calculations, a monthly remittance for withholding taxes for each employee, data for year-end T4s as well as records of employment in the event of layoffs or dismissals. Understanding payroll will assist in determining cash flow needs as well as job costing and ultimately the bottom line. Failure to remit payroll withholding taxes will definitely invite an audit along with penalties and interest.
Far too many entrepreneurs use inefficient and ineffective accounting software. As a result, the information created is inadequate for a company’s own purposes and creates additional issues not only for regular government remittances but also for the accountant preparing year-end statements and tax returns. Poor accounting systems cost money in the long run.
Bookkeeping is more than entering data. A qualified and experienced bookkeeper not only understands the accounting system but will understand payroll, HST, WSIB, account allocation, reconciliation, online banking and a host of other business requirements. A good bookkeeper managing an accounting system suited to your business will provide information to management that is critical to making effective business decisions and also generates information critical for proper reporting to external sources such as the bank or the CRA. An inept bookkeeper is a recipe for disaster as the errors or omissions will result in mistakes in financial and tax reporting as well as the consequent cost of repairing the damage.
Measure Twice, Cut Once
This old carpenter’s maxim is just a pithy way of saying that errors are unnecessary and correcting them is costly. Before making decisions on major purchases, financing, staffing, accounting systems or tax strategies, do your homework. Getting and using expert knowledge ensures that decisions will not run afoul of tax authorities or other regulatory bodies.
Let Others Attend to the Details
Dealing with the CRA and other regulatory bodies is not always what entrepreneurs do best. Nevertheless, establishing procedures that will allow other staff to attend to the details will make life easier for you while making sure your business meets all regulatory requirements.
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