CORPORATE TAXATION: WHAT YOU NEED TO KNOW Presented by Marlene L. Grant, CGA Corporation February 16 th & 17th, 2010
BRIEF HISTORY ABOUT MYSELF I am the owner of a small accounting practice. Graduated from Algonquin in 1992 and obtained my Certified General Accounting designation in 2002. Over 15 years accounting and taxation experience in the Ottawa area in public accounting as an auditor and controllership positions within the private sector. Work extensively with owner-managed businesses, not-for profit organizations and professionals. Providing accounting, assurance, taxation, business startup assistance and software services to clients. 2009 Nepean Chamber of Commerce award nominee.
CORPORATION TAXATION Corporations are separate legal entities. Required to Incorporate and register for a Business Number (BN) Advantages & Disadvantage of Incorporating: Incorporate to Generate Tax Savings & Limit liability; Remuneration Strategy & Family Members. Income splitting through shares to family members; Creditor Proofing; Investing excess after tax cash in Corporation; Incorporation costs; Increase tax and other filing obligations;
TAX AND OTHER FILING OBLIGATIONS Corporate Tax Returns: Returns are due six months after the fiscal year-end; Taxes due are payable three months after the fiscal year-end: Tax Instalment Payments required if taxes payable >$3,000. Goods & Services Tax (GST) Registrants charge 5% GST or 13% HST; Register for (GST/HST) if revenues are more than $30,000; Have 29 days to register for GST once over the $30,000; Register online, telephone, fax and mail and CRA will open up the GST account; CRA will assign the reporting periods and method; Due dates for the returns depend on the reporting periods assign; Annual filer for taxable revenues <$1,500,000; Instalment payments required if taxes due >$3,000.00.
TAX AND OTHER FILING OBLIGATIONS (continued) Provincial Sales Tax (PST): Register with the Province of Ontario; Depending on the services you provide; Returns are due by the 23 rd of the month following, monthly, quarterly and biannual reporting. Workers Safety and Insurance Board (WSIB): As soon as the first employees is hire you may have to register; Should call them to ensure you are in compliance, very few companies are exempt; Returns are due on a quarterly basis and premiums due one month following the end of the quarter.
TAX AND OTHER FILING OBLIGATIONS (continued) Employer Health Tax (EHT) If payroll is >$600,000 will have to register; Monthly payments are required; Annual return due by March 15 th. Payroll Funds withdrawn by owners from the company will be taxed in their hands; Setting up payroll minimize the owners tax liability. Canada Pension Plan (CPP), Employment Insurance (EI) & Income taxes should deducted from all payroll amounts; Source deductions are due the 15 th of the month following the payroll or if quarterly they are due the 15 th of the month following the end of the quarter; T-Slips to be issued: T4 Payroll to employees and owners; T4A For amounts > $500.00 paid to individuals for services rendered; T5 Dividends issued to owners; More Severe Penalties for Late Filing & Late Remitting.
MAINTAINING BOOKS & RECORDS CRA Requires that books and records are properly maintained: To determine if the business is in compliance with the Income Tax Act; Should be in an appropriate form to enable verification; Must be supported by source documents paper or electronic; Each transaction should be clear and legible; Must be maintained in English or French or another form authorized by CRA; Have to be retained for six years after the tax year they relate to; One way to ensure proper books is to hire a competent bookkeeper; If you choose to do your own bookkeeping make sure to get properly trained before starting; In order to properly maintain your books and records you will need to understand accounting and bookkeeping; Can maintain your books using QuickBooks or Simply Accounting.
ELIGIBLE EXPENSES Types of operating expenses Accounting and legal fees Advertising expenses Bad debts Business tax, fees, licenses and dues Business start-up costs Capital Cost Allowance Home office expenses Insurance expenses Interest & bank charges Meals & entertainment Motor vehicle expenses Office expenses Professional fees Salaries, wages & benefits Travel Telephone & utilities
PERSONAL TAXATION Spousal Pension Income Splitting. Tax-Free Savings Account (TFSA) RRSP & RESP Contributions. Child Fitness Tax Credit. Medical Expense Tax Credit. Federal and Provincial Tax Rates Tax Instalment Payments. Working Income Tax Benefit. Age Credit & Home Renovation Tax Credit Home Buyers Plan & First-Time Home Buyers Tax Credit
PERSONAL TAX RATES Basic personal amount Federal $10,320 & Provincial $8,881 Maximum CPP of $2,118.60 Pension income amount $2,000.00 Federal Tax on taxable income: $40,726 or less taxed at 15% $40,726 to $81,452 taxed at 22% $81,452 to $126,264 taxed at 26% Over $126,264 taxed at 29% Provincial Tax on taxable income: $36,848 or less taxed at 6.05% $36,850 to $73,698 taxed at 9.15% Over $73,698 taxed at 11.16% Highest marginal tax rate is 46.41% on other income 23.20% on capital gains 23.06% on taxable dividends from large corporations 31.34% on taxable dividends from small corporations
TOP TEN WAYS A CGA CAN HELP YOU Sound Business Advice. Business Start up. Accounting Services. Controllership Services. Software Installation and training. Systems Implementation. Estate Planning. Financial Planning. Succession Planning. Tax Planning and Preparation.
BUSINESS & PERSONAL TAXATION: WHAT YOU NEED TO KNOW Presented by Marlene L. Grant, CGA Corporation February 16 th & 17th, 2010 THANK YOU Any Questions?