Corporate Income Tax, Personal Income Tax, Small Business

Salary or Dividends?

The way a bonus is paid has a significant effect on corporate and personal after-tax income.

You are an owner-manager and you’ve just had a really good year. Profits are up significantly and you want to reward your employee shareholders with a bonus. But how? Salary or dividends? The answer to this age-old question is not as simple as it seems. It is even possible to receive remuneration that is a combination of salary and dividends. However, because every company and its shareholders have different needs, a “one size fits all” approach to remuneration is not prudent. Continue reading

Corporate Income Tax, Personal Income Tax

Income Tax Fraud

Make sure you hire the right person or company to prepare your income tax return.

According to the Canada Revenue Agency (CRA), 28 million people file income tax returns each year and of that number, 50% use tax preparers. Tax preparers can register with the CRA to use EFILE to transmit the completed return through an encryption technology that instantly acknowledges the tax return has been received.

So, what could possibly go wrong for the taxpayer? Unfortunately, not all tax preparers are honest. And, these less-than-honest ones take advantage of the fact that prospective clients believe the tax preparer:

  • is an expert and will prepare the return better than they are able to do it themselves
  • will find ways to get the maximum refund
  • has the taxpayer’s best interest at heart
  • is registered to EFILE tax returns and thus the CRA vouches for their integrity

Continue reading

Corporate Income Tax, Small Business

Year-End Tax Strategies

It’s never too early to start planning your year-end tax strategies.

For many businesses, the month of October signals that the end of the fiscal year is not far away. Realizing that December 31 is fast approaching should prompt you, as an owner-manager, to review your year-to-date corporate and personal data and start putting your tax strategies into place. At the same time, remember to set up a meeting with your CPA. (Corporations can have a fiscal year end other than Dec. 31; this would, of course, affect the timing of the year-end meeting.) Continue reading

Corporate Income Tax, Personal Income Tax, Small Business

Pooled Registered Pension Plans (PRPPs)

Small-business owners and the self-employed now have a new pension plan alternative.

How the PRPP Works

Federal Pooled Registered Pension Plan legislation came into force in 2012. It is designed to provide a retirement savings option for the self-employed and businesses that do not have an employee pension plan. It is attractive for those companies that cannot afford the cost of administering an employer-sponsored plan or a company RRSP, and do not want the fiduciary liability that may accompany such a plan. Continue reading

Corporate Income Tax, Small Business

Zappers

New federal legislation is now in place to punish users of electronic sales suppression software.

The federal government is getting tough with businesses that use electronic sales suppression (ESS) software (commonly called “zappers”) to delete or modify point-of-sale (POS) transactions for the purpose of evading taxes. Effective January 1, 2014, zapper users will, of course, not only have to pay the unremitted taxes plus interest but will also face substantial fines and even imprisonment if they manufacture, sell or possess these devices. These sanctions have been introduced through amendments to the Excise Tax Act and the Income Tax Act. Continue reading