The government always gets its taxes, and one of its main sources of tax is tax deducted at source. So, when you run your own business, you have to make sure that you are paying up the tax deducted at the source, because if you don’t, you are putting your business risk at risk. Audits and fines are just the start.
As a responsible business owner, the government trusts you to ensure the tax deducted at source is taken care of. So, what are those taxes?
The first tax that you have to pay is the income tax which is deducted at source. It largely depends on the tax bracket your employees come under. Canada Revenue Agency offers a Payroll Deduction Calculator that you can utilize to assess how much income tax you should be cutting.
Apart from deducting from the income, you also have to deduct taxes from bonuses, commissions and stock options.
EI is a backup for employees to get through the hard times of unemployment (when it started EI was called Unemployment Insurance). EI benefits can even be applied to self-employed and small business owners.
However, EI is also taxable. The government calculates the taxes to be paid and as the business owner, you need to ensure that they are. It is also vital that you keep a Record of Employment which determines insurable hours depending on employees work.
Canadian Pension Plan is a good way to ensure that your employees, and you, still have the money tap running after retirement. By law, you have to put money into your employees CPP account. Have a look at the government’s CPP contribution rates and maximums.
You can also use an online calculator for CPP. The retirement age is 65, but your employees can start the CPP benefits as early as 60.
Health Care Deduction
You should also take Health care insurance into account. It varies from province to province. You will have to pay about $40-$50 per month on health care for your employees.
However, some provinces don’t require health care premiums to be deducted at source, so ensure you are aware.
If you do not comply with Canada Revenue Agency, you can be fined anywhere between $10,000 and $25,000, prosecuted and imprisoned for a year.
When it comes to deducting taxes at source, here are some final tips.
– Double Check: Always double check and ensure you are paying the right taxes and the right amount.
– Stay upto Date: Almost every year there is a change in the tax structure and procedure so be aware.
– On Time: This requires some good planning on your part, so ensure that you are on time to avoid any penalties.
– Double Check if you are in Quebec: Most of these rules don’t apply to Quebec, so ensure you double check.
– Talk to an Expert: Finally, there is nothing better than talking to an expert. An accountant knows the ins and outs of the tax law. This is the best way to ensure that you haven’t missed anything.
Tax laws are confusing, you want to make sure you are deducting the right ones at the source.