Comments for Wizebiz.ca

Comment on How to Pay Yourself – Corporation by Tracy

Tracy — Sun, 03 Apr 2011 20:03:29 +0000

In a few years I plan to stop working and no longer inject income into my CCPC (IT Consulting Services). To date I have been the sole director and common share holder, no Salary paid and only 2 years where the CCPC paid me via a Dividend. My CCPC Retained Earnings have grown and I don’t plan on selling my CCPC or leaving it as a legacy. I now believe I should begin planning a depletion (payment) of those retained earnings before there are personal tax implications due to future sources of income such OAS, CPP (from earlier employment contributions prior to my CCPC) and RRSPs(becoming RRIFs). And I believe it would be beneficial to deplete the retained earnings before I begin the process of dissolving the corporation, at which point any cash remaining in the corporation would still need to be paid out. It is my understanding that the 2 ways of being paid/depleting the retained earnings are via Salary or Dividends. I am considering the Dividend route since in my situation it will be taxed more favorably than Salary. Another consideration is to issue(sell) another common share to my husband, who could then also receive the equivalent amount of declared dividends. My husband and I currently have only minimal investment income and we have lived off of existing savings. We would have the CCPC declare dividends to the extent that it is favorable for our personal tax year. Here are my questions:
1. In my situation, would payment of annual Dividends be the most tax favorable method for depleting the CCPC retained earnings, before dissolving the corporation? Or is there some other method I should be considering in conjunction with paying Dividends? For instance, is there a way to pay the retained earnings as a “taxable capital gain” in order to apply against an individual’s previous years capital losses?
2. Are there any CCPC CRA issues with CCPC dividends being declared in a year when the CCPC has made no active business income and still has Retained Earnings?
3. I realize that by issuing a common share to my husband he will have an equal shareholder vote. Even though I am not concerned with this, are there advantages to instead have the CCPC set up a 2nd class of shares for issuing a share to my husband? One advantage I can think of is the ability to declare a different dividend for each class. Is it ok to have Common A share and Common B share classes and each with a different dividend payout?
4. Are there any CCPC CRA issues with only “annual” dividends being paid out year after year to shareholders, and never a Salary paid?

Comment on How to Pay Yourself – Corporation by Ahmahndoode

Ahmahndoode — Sat, 02 Apr 2011 20:49:07 +0000

I've been invoicing my corporation as a contractor and the corp issues me a T4A annually.
I have an upcoming meeting with the CRA, as they are taking the position that I cannot pay myself this way and must use of the above methods. I have read in another of your forums that you CAN pay yourself as a self employed contractor. I will be appealing the CRA's decision and need as much documented support as possible. I'd love to hear some comments on this!

Comment on How to Pay Yourself – Corporation by Ahmahndoode

Ahmahndoode — Thu, 31 Mar 2011 22:27:19 +0000

I quote your blog here:

"You can certainly pay yourself as you are a self-employed person. The catch of this method is that you will need to register yourself a business number for your self-employee business. So now you have two business, one corporate, and one sole proprietor with two business number, and if you want to collect and claim GST, PST, or import and export, you will also need to register separate accounts for each business. When you file your personal tax, the amount invoiced to your self-employee business and your business expenses can be reported in form T2124 Statement of Business Activities or T2032 Statement of Professional Activities. (You can find this forms in the CRA website).

Hope this help.
Cecilia"

I have been paying myself in this exact manner since 2006. The CRA has contacted me to review this and says it is not allowed. I must pay myself either by dividend, loan, or salary. I would like to continue as self employed sole proprietor and pay myself accordingly from my corporation.

Where does it state in The Income Tax Act that I cannot do this?
thx!

Comment on How to Pay Yourself – Corporation by Tracy

Tracy — Sat, 19 Mar 2011 19:23:51 +0000

Thanks again Cecilia! I noticed the great services your company is offering. I am seriously considering one or more of them.

Comment on Report Sales Taxes and Expenses in Quickbook by Cecilia Leung

Cecilia Leung — Fri, 18 Mar 2011 01:25:37 +0000

You can record it as your normal expenses, it is an reimbursement. Yes you should separate out the GST as ITC.

Comment on How to Pay Yourself – Corporation by Cecilia Leung

Cecilia Leung — Fri, 18 Mar 2011 01:19:44 +0000

if you taxable income is less than 500,000, you are consider small business. Dividend or not will not affect the small business eligibility.

Comment on Report Sales Taxes and Expenses in Quickbook by Goosusan

Goosusan — Thu, 17 Mar 2011 21:17:30 +0000

Paid Cindy (employee) $53.50 (includes GST) from Petty Cash for Gas Expense.

How do I record this, and do I separate tax out, if so, is it considered an ITC

Comment on How to Pay Yourself – Corporation by Tracy

Tracy — Thu, 17 Mar 2011 19:12:17 +0000

Hi Cecilia…just back visiting your wonderful website again and re-reading your response to my small business deduction question. I think I mis-read it the first time because of the use of the double “not”s. My corp taxable income is less than $500,000. Can you please confirm that it is ok to pay myself a dividend and my corporation would still qualify to use the small business deduction?
Thanks so much…Tracy

Comment on 2008 Payroll T4 Deadline by Alishasmith89

Alishasmith89 — Mon, 07 Feb 2011 18:27:49 +0000

I had the same problem..iam worried about this years T$ (for 2010 year) any way you got this figured out a couple years back? advice on what you could give me? I had this employer not pay me on time, I left in october 2010 and still not recieved a ROE!!! any help would be great! email is alishasmith89@hotmail.com

Comment on How to Pay Yourself – Corporation by PMP Cert

PMP Cert — Fri, 31 Dec 2010 07:33:29 +0000

Should you pay yourself what you need to cover expenses? What your business can afford? The salary you left behind to launch your business?