If you are a business owner, payroll taxes will be a critical part of your day-to-day business operations. The Canadian government requires all employers to play an active part in processing payroll taxes and ensuring proper funds are deducted from each worker’s paycheck. If you would like to know more about the role that payroll plays in annual taxes but are unsure of where to begin, consider the following key points related to employee payroll taxes:
1. Business owners are responsible
First and foremost, as an employer, you are accountable for being aware of your payroll taxation duties and ensuring that the proper deductions are made from all employee income. When a new worker is hired, fired or experiences a change in status, it is your and your payroll department’s obligation to make sure tax filings properly reflect these changes. Nationwide deductions for pension, employment insurance, and income tax should always be managed by the business owner and payroll staff, not the employee.
2. Owners can set employees and the company up for success
When a new employee starts working for your business, it is best to have them fill out all required paperwork immediately. This will ensure the employee’s paycheck properly reflects their employment status and income at all times. Once initial paperwork is complete, storing all records in a secure place and maintaining organized files for each employee will help alleviate confusion when tax season rolls around.
3. Different types of payroll deductions are available
It is important to know the difference between mandatory and optional payroll deductions. Every employer nationwide must deduct Canada Pension Plan funds, Employment Insurance and income taxes from each of their employee’s paychecks for as long as they are paid by the company. However, employees may also opt into additional deductions and have a larger sum pulled from their paycheck each pay cycle. It is important to carefully record these payroll preferences so that appropriate deductions can be made throughout the year.
4. Life events can require payroll changes
When employees experience a major life event, such as a birth, death, serious injury or other occurrences, they may need to take time away from work. It is essential that your company’s policies for serious events are accurately reflected not only in your employee’s pay stub, but also in the tax deductions that are withheld. When an individual takes extended leave, income tax, pension funds and more must still be withheld from the individual’s income as long as they are being paid.
Staying on top of payroll taxes is a continuous task that requires great organization and attention to detail. If you are a business owner and would like more information on how payroll taxes affect your employees and company, consult Liu & Associates today for additional guidance.