Frequently Asked Tax & Accounting Questions

What do I need to bring in for you to prepare my taxes?

Here are some checklists you can use a guide to help make sure we have everything we need to prepare your taxes. 

Life is always bringing on new changes; make sure we are up to date so we don't miss out on getting you the best return on your money.

Do I need to register for a GST number?

If you are already registered with an HST number you do not need to register for a GST number. Your HST account will automatically switch over to a GST account.
Make sure to change your invoices on April 1, 2013 to only charge GST or GST and PST if it is applicable to you.
If you don’t already have a GST account you don’t need to register until your total sales, before any expenses, reaches the “Small Supplier” threshold of $30,000 in any single calendar quarter and in the last four consecutive calendar quarters. This would mean if you earned $32,000 collectively in the last four quarters, you should register and collect GST for the start of the next quarter.
If you have hit this threshold you can register at the following website or contact our office and we can help you register. If you are collecting GST you must be registered and you must remit all amounts collected to CRA.
For more information on GST please contact us or review RC4022, the general information guide for GST/HST registrants.

Wondering if you should start a Tax Free Savings Account?

In here you can find information regarding: 
   - Contribution room 
   - Qualifying transfers 
   - Death of a TFSA holder 
   - Tax payable on excess contributions 
   - And much more... 
It is important to think about what type of investment will work best for you, there are some important questions you should ask such as:
  - What is the purpose of the investment, growth, security, income?
  - How long do you want to keep the money in the investment?
  - Do you want to have access to the funds without incurring a penalty?
If you would like to discuss if a TFSA would be beneficial for you please contact us and we will help you with your investment planning, we can also refer you to investment advisors that will help you get the most for your money.

When are my taxes due?

If you are a Limited Corporation you are required to pay your taxes 3 months after your fiscal year end but you can file your tax return 6 months after your fiscal year end. 

If you are an Individual your return and any taxes owing are due on April 30 every year. 

If you are a Proprietorship or Partnership your taxes owing are due on April 30 but you don’t have to file your return until June 15. 

For tax rates please see our Links page.

Can I give a wage to my dependant if they assist me in my business?

Yes, if your children are active in your business we can declare wages to them. This allows your business to record wage expenses while at the same time start building RRSP contribution room for your child. 

Wages to children are often scrutinized by Canada Revenue Agency in the event of an audit. All amounts declared to your children must be reasonable, reported on their tax returns and paid in full. 

Please contact us to discuss reasonable amounts and tax planning for you and your children.

Which is better, salary or dividends?

If you pay yourself salary, the amount is a deductible expense to your company and is taxable in your hands. You will be required to deduct income tax and CPP premiums from your salary. 

Alternatively, you can have the income taxed in your corporation and then pay the after-tax earnings to yourself, as dividends, which are not deductible for the corporation. Dividends are payments made to company shareholders from the profits of the company. If the company has not made a profit over a given period then it cannot pay a dividend. 

You’ll face tax on the dividends paid to you, but at a lower tax rate than salary. Why? Since, the corporation has already paid tax on the income when dividends are received, the amount is “grossed up” and then you are entitled to a dividend tax credit (to provide a tax credit for the approximate tax that was paid by the company).

Pros and Cons when considering Salary or Dividends 

Salary Pros  
  • Salary will count as earned income for pension contributions and dividends will not.  
  • Help with financing purposes. If you are planning on applying for a line of credit or a mortgage, then paying yourself a salary will help you qualify.  
  • Salaries paid by the company are an expense to the company and can reduce net income and corporate taxes payable. 

Salary Cons 
  • Can be used only to pay employees of the company. 
  • Salary requires you to deduct income tax and CPP premiums and dividends do not. 
  • Have the burden to do payroll. (For example, manage payroll remittances to the Canada Revenue Agency, preparation of T4 slips, calculation of source deductions, etc.) 

Dividends Pros 
  • Can be paid to individuals who are not employees of the company (They must be shareholders). 
  • More tax efficient; dividends are taxed at a lower rate than salary. 
  • Dividends are administratively simple, you only need to file a T5 with CRA by February 28 of the following year. 

Dividends Cons 
  • You can only pay dividends out of profits made by the company (If there is no balance in retained earnings, dividends can’t be paid out). 
  • Directly reduces the equity of the company. (For example, when a dividend of $100,000 is declared and paid, the corporation’s cash is reduced by $100,000 and its retained earnings is reduced by $100,000). 
  • Dividends are not an expense of the corporation and, therefore, dividends do not reduce the corporation’s net income or its taxable income.

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