The Importance of Leaving Payroll Deductions Alone
When money is tight and your business funds are low, it can be tempting to look around for additional pools of money to make ends meet. However, it is crucial that you steer clear of taking money from the funds you collected for your employee’s payroll deductions. Whether the money was collected for Employment Insurance, the Canada Pension Plan or income tax, these funds were made in good faith on behalf of your employees. If you do pull money out of these earmarked funds, you are essentially stealing money from both your employees and the CRA. That may seem like a strong statement, but you need to carefully consider the potential consequences for your business.
Pay Me Now or Pay Me Later
The CRA assumes that businesses will make timely payroll deduction payments when they have employees working for them. When payments are delayed or missed altogether, the government will eventually take notice. While it may not happen the very next month, the CRA will start assessing interest charges and penalties to your payroll obligations. In addition, this black mark on your business record could make it more difficult to secure future business loans.
Even corporations need to be careful of taking money from payroll deduction accounts. Business owners who have incorporated need to know that they are not fully immune from personal liability. In fact, the CRA can hold the directors personally liable for payments due to the government. This “Director’s Liability” can include business owners who are also acting directors for their corporation. Unsuspecting owners can end up with costly liens against their car or home for reaching into the funds meant for the CRA.
If you have missed a few payments to the CRA for any reason, it is smart to reach out and make the first move to make things right. In the long run, you may be surprised that the CRA wants to work with you to get your business obligations back on track.