How to Use Online Banking to File and Pay Your Business Sales Tax, Payroll DAS and Corporate Tax
The major Canadian banks including RBC,CIBC, TD, BMO and Scotiabank as well as some regional banks such Caisse Desjardins Access D’Affaires conveniently have business tax filings service which replicate the forms that have to be submitted to the government for:
sales tax (GST/HST and QST),
Payroll tax (deductions at source payable to Revenue Canada and Revenue Quebec) and
corporate taxes payable to Revenue Canada (CRA) and Revenue Quebec (RQ).
Business tax instalment payments (including GST-QST instalments)
This means that instead of entering the data on the forms that are available via my business account at CRA and RQ and then going to your bank to make payment, either online or via mail, it can all be done at one time through one form that serves as both tax filing and payment.
Can You Pay Yourself a Management Fee Instead of Salary or Dividends?
As an incorporated business owner in Canada, one of the most important and pervasive questions (certainly from my point of view) you face is how to pay yourself from the corporation.
Generally speaking there are two primary options: salary or dividends.
There is also a third option which is management fees and is often bandied about as an easier alternative.
Should You Pay Yourself a Salary or Dividend? 7 Considerations For Small Business Owners
While incorporation has many benefits for small business owners, it does introduce additional complexities that are not faced by registered businesses. Unincorporated business owners are essentially taxed on their net business income, which allows for more time to devote to tax planning and how to spend all of your richly deserved profits. Incorporated business owners, on the other hand, cannot just withdraw cash from their businesses as the need or whim arises. There needs to be a formalized structure in place which usually takes the form of either salary or dividends. Either type of remuneration has tax and other implications that need to be considered before making a decision.
Should You Incorporate Your Rental Property
For anyone looking to build wealth, achieve financial independence and/or retire early , it is important to build sources of passive income i.e. streams of income that are generated month to month without having to actively work for them. One of the most popular methods of building passive income is to purchase a property that generates rental income. If done correctly and with some luck, the return on investments (ROI) , which is composed of both rental income and appreciation in the value of the property, can significantly improve your net worth.
An important decisions when purchasing a rental property is whether you should own the property in your own name or purchase it through a corporation. The right decision depends on a variety of factors.
Essentials for Starting Your Sole Proprietorship
According to Canada Revenue Agency (CRA), the definition of a sole proprietorship is as follows:
A sole proprietorship is an unincorporated business that is owned by one individual. It is the simplest kind of business structure. The owner of a sole proprietorship has sole responsibility for making decisions, receives all the profits, claims all losses, and does not have separate legal status from the business. If you are a sole proprietor, you also assume all the risks of the business. The risks extend even to your personal property and assets.
The simple answer is that if you are selling any type of product or service, on an ongoing basis, and you are not employed by another organization where you receive an employment income slip such as a T4, you essentially have a business. If this business in not incorporated or part of a partnership with one or more individuals, then you are a sole proprietorship.
Pros and Cons of Incorporating your small business
The decision to incorporate can be a difficult one that many small businesses face at some point in their lifetime and . Incorporation, literally, represents the creation of a new person. Whereas a sole proprietorship is an extension of one's self, a corporation takes on a life of it's own; it can give birth to subsidiary, marry via a merger and die with a dissolution. It has to file it's own tax return, can be sued and has a set of rules that govern it's existence. Below are some of the points to consider when deciding whether to incorporate:
10 Tax Facts that every corporation Owner should Know
4 Accounting Transactions that Use Journal Entries and How to Enter them in QBO
Accounting software has come a long way in the past few years. Although a good bookkeeper can be invaluable, It has become fairly easy for business owners and their support staff to take on the responsibility of entering day to day transactions while they employ accountants for the more complex aspects of their accounting and tax. While entering the majority of transactions in software, such as Quickbooks Online is fairly straightforward, there are transactions that require somewhat special treatment discussed below:
Preparing your Small Business and Self Employed Tax Return with UFile Tax Software
A Guide To Preparing the T2125 For Small Business Or Self Employed Owners
While being self employed comes with numerous benefits, there are also many challenges. One of the major ones is ensuring that you are aware of, and fulfill, your tax obligations on a timely basis. In the beginning these tax obligations can seem mystifying and somewhat overwhelming, but once you understand what needs to be done and you set up processes and reminders, it tends to become much more manageable. This in turn reduces stress as tax deadlines approach and can result in significant potential tax savings as you keep track of all your tax deductions and avoid interest and penalties.
Why you should register for CRA and RQ My Business Account (and how to do it)
With all data moving to the cloud these days and ubiquitous online access to banking, customer and supplier portals, it makes sense that Revenue Canada (CRA) and Revenue Quebec (RQ) have followed suit. Considerable resources have been spent by the revenue agencies on developing their online portals and encouraging both individual taxpayers and businesses to move the majority of their tax related interactions online (almost every accountant conference has an appearance by a CRA representative talking about the improvements to their online portal and imploring accountants to convince their clients to make the switch). The upfront investment has resulted in significant cost savings for CRA/RQ (postage costs alone have dropped dramatically) while improving accuracy and perhaps most importantly increasing the effectiveness of tax collection efforts. CRA personnel have been able to move away from verifying calculations and manually reviewing tax returns to more value added analysis which has allowed them to identify tax miscreants with higher accuracy.
For both the individual taxpayer and small business owner there are numerous benefits to registering online:
What is Capital Cost Allowance and How Does it Impact Your Business
Frequently a client of mine will purchase a high ticket item such as a computer or a piece of furniture and will simply show it as an expense on their profit and loss. Since you purchased something that relates to your business, it should be considered to be a deduction and classified as an expenses.
Unfortunately, accountants and revenue agencies do not see it this way. From their perspective, an item that is purchased for a business, whose value extends beyond one year, is actually an asset that should be depreciated over the useful life of the asset. In other words, the expense that you can claim for the asset is only the portion of the asset that is used in the year that you claim it.
While accountants refer to the amount of the asset that is expensed each year as depreciation, Revenue Canada refers to this as capital cost allowance or CCA.
How to Pay Dividends: Completing the T5 Slip and Summary
If you are the owner of a Canadian corporation, you can choose to pay yourself (and other shareholders) dividends instead of a salary. Alternatively, some shareholders also take dividends in addition to a salary depending on their tax planning strategy. If you do decide to pay yourself dividends, it is important to ensure that you prepare the proper documentation for Revenue Canada (CRA) and if you live in Quebec, Revenue Quebec (MRQ) since this must be reported as investment income on your personal tax return in the calendar year in which the dividends are paid. If you are paying dividends to a Canadian shareholder, you must issue a T5 slip while non resident shareholders receive an NR4 slip. The T5 dividend slips are generally due by February 28th of the calendar year following the year in which the dividend was paid Although no income taxes are due at the time of filing the T5 slips with the government, interest and penalties apply for late filing . The process of submitting preparing and submitting the dividend declarations and the documents that need to be filled out and returned to the CRA and MRQ are discussed below:
What Happens When You Contribute Excess Amounts to your RRSP
Being able to contribute to an RRSP is one of the great tax saving strategies available to all Individual Canadian Taxpayers who generate “earned income” which is essentially income earned from employment (salaries) or self employment. It is extremely important to know that there are unfortunately limits to how much you can contribute and Revenue Canada (CRA) actually imposes penalties on overcontributions to your RRSP.
Note that passive income like dividends and interest is ineligible and does not factor into the calculation for how much you can contribute to an RRSP.
4 Alternatives for Preparing Your Small Business Payroll
Paying salaries to employees (or yourself) requires more than just determining the gross amount to be paid. The Canada Revenue Agency and Revenue Quebec require that employers calculate a variety of taxes on the salaries paid, remit them to the federal and provincial governments and prepare annual reports demonstrating that the calculations are correct and all salary deductions have been paid. This can be a lot of work for business owners whose time is better spent generating sales and building their businesses. Luckily there are many options for small business owners to calculate their payroll and salary remittances, many of which simplify the process: