As a tradesperson, you may think the taxation department is out to get you and to be honest you might be right. Construction is a red flag industry due to the number of small suppliers and short-term workers who do cash jobs. So we can’t stress enough how important it is to declare your income honestly if you want to avoid penalties!
Here are our 4 top Tips on how to ensure you keep the CRA Happy
Create Accurate Invoices
If you want to be able to sleep at night knowing that you have nothing to hide then you need to ensure you are creating accurate invoices for all of your jobs. This way if the CRA comes knocking at your door you have everything you need to prove you aren’t hiding income.
Use a software like Quickbooks Online to create your invoices. This will help you ensure all invoices are accurate and stored in the one place. It will also save you a lot of time and money when bookkeeping.
Sub Vs Employee? Know the Difference
The most costly mistake a lot of construction business make is to pay people who should be categorized as an employee as a sub. A quick test to ensure your sub should not be paid as an employee is to ask yourself these two questions.
Does your sub have their own GST and WCB numbers?
Do they own their own tools and take on other jobs besides yours?
If the answer to both is YES then you can pay them as a sub. If they answer NO then you MUST pay them as an employee.
The government doesn’t like missing out on employment taxes so the penalty for incorrect categorization includes back paying payroll taxes INCLUDING the employee’s portion as well as paying penalties and interest.
GST stands for Goods and Services Tax, not Great Sunny Times. It’s not an optional fun tax…It’s MANDATORY. GST needs to be charged on EVERYTHING you invoice. Yes, you need to charge GST on your materials. At the end of the year, your total GST collected needs to be 5% of your total sales. If it isn’t, the CRA will want to know why and you will be liable for the GST that you should have charged.
Managing your bookkeeping on top of managing your business is challenging. Most contractors and construction companies we work with come into the office with plastic bags filled with receipts and invoices so we know how easily this part of the business can fall through the cracks. Knowing your numbers and ensuring you are compliant is an extremely important part of your business and shouldn’t be ignored. Hire a professional bookkeeper who can keep you on track and make sure you are compliant with all your filings.
If you need help with your bookkeeping contact us today for an obligation free quotation.