How accurate payroll reduce the possibility of tax penalties

3 min read

Your payroll system acts as a link between your company, your employees, and the numerous taxing authorities who are involved in the money you pay your workforce. Payroll accuracy is crucial because it will help you to properly fulfil your commitments to your partners in the payroll process and will hold you fully accountable to them. Additionally, a precise payroll by payroll service providers in Canada might spare you the worry and inconvenience of having to go back and organise your accounting system come tax time.



How accurate payroll reduce the possibility of tax penalties

You have a legal obligation as an employer to make proper employee source deductions and pay the necessary taxes to the Canadian Revenue Agency (CRA). You run the very real possibility of being charged with expensive tax-filing penalties—and possibly even a CRA investigation—if you are not in compliance with all the most recent tax rules and regulations.



Moreover, with the best accounting software your payroll providers should assist you in meeting your employee payroll requirements by:

  • Creating precise tax calculations for employees
  • Deducting and remitting applicable taxes
  • Developing unique taxable and non-taxable benefits;
  • calculating payroll advance withholdings, and
  • Creating government forms for print or online submission etc



How accurate payroll helps with taxes

Your company must withhold a variety of taxes from employee paychecks, including state and federal income taxes, as well as Social Security and Medicare taxes. Your ability to appropriately report and pay these taxes is dependent on maintaining exact payroll records that accurately represent your company's payroll activity. 

Failure to keep accurate payroll records may result in time-consuming and costly accounting tasks. Furthermore, inconsistent or inaccurate payroll accounting can lead to costly penalties and increase the likelihood of a tax audit.



Why consistency is important 

Payroll records that are accurate and precise document a crucial aspect of your company's finances and allow you to create consistency among various bookkeeping operations such as reconciling tax liabilities with cash flow estimates, balance sheets, and profit-and-loss statements. 

When your company presents its accounts to an outside party, such as a loan officer or a potential investor, all of your records, including payroll, must be as accurate and precise as possible. Inconsistencies that are not resolved give the impression of shoddy bookkeeping processes and a lack of accountability.

Wave Taxes is among the best payroll service providers in Canada and offers businesses a hassle-free payroll integration service with automated tax and wage computations. You can connect with us by visiting our website to know more about our payroll service.

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