Please welcome the newest admitted partner, Max Senyuk. Max will be managing our new office in New Westminster all the way over in the beautiful province of British Columbia! Max brings many years of experience working complex tax matters for small business and personal tax clients. We here at Livesey Shen are very exited to bring Max’s wealth of knowledge and experience to the team. If you are in the Vancouver area and need an accountant, please do not hesitate to give Max a call! (604) 723 – 5876.
As always, if you require any of our services whether it be Audit, Accounting, Taxation or Advisory, please give one of our three offices a call today!!
Happy New Year! I hope everyone is doing well and staying safe. Our first blog post of 2021 will surely affect many businesses as they continue to find ways to navigate this pandemic. Please we urge each and everyone of our followers to share this post as it may help one of your friends/family members. It does not matter where you are located, we have and will continue to accept clients from all over this beautiful country of ours!
Thank you again for your continued support!
Take care and stay safe!
As we put 2020 behind us, taxes are likely the last thing a business is thinking about. However, some of our clients inquired with us over the holidays about tax implications for incurring a business loss in 2020.
Due to the pandemic in 2020, many companies have experienced a drop in revenue. This combined with the inevitable expenses incurred during the year may have resulted in a large loss for the company.
For small business owners, there are some tax planning considerations for incurring a loss in their operations:
Operating losses at the end of a fiscal year can be applied against taxable income earned in the past three years. This means if your company was taxable in 2017-2019, losses from 2020 can be used to reduce the taxable income incurred during those three periods and you will receive a refund for taxes paid in the prior year.
If there are still losses from 2020 remaining after they have been used to reduce taxable income in the previous three years, these losses can be applied against income earned in the future for up to 20 years.
If your small business plans sell or merge with another company, the losses from your company can be used in the new entity if the new entity plans to operate the same business or if the buyer already carries a similar business.
If these issues apply to your company or you would like additional insight about this, please reach out to us on our website www.liveseyshencpa.ca and Ryan or Tony would gladly assist you.
Due to Covid-19 pandemic, the CRA modified the 2020 tax-filing and payment deadlines to help taxpayers figure out their finances before paying their taxes. The traditional April deadline was pushed back to September. Businesses and individuals received more time to file their taxes and accumulate money to make payments amid the difficulties caused by the pandemic.
With no visible end to the pandemic, our clients were wondering what the tax-deadline situation will look like in 2021. As of the time of this article, there has been no announcements regarding tax deadlines in 2021, but everybody must be thinking about it as 2020 is coming to a close. Unless the CRA announces anything, we cannot expect any delays in future tax deadlines.
For tax accountants, the following dates represent major benchmarks for personal or corporate tax compliance filings.
December 31, 2020 - This is the most popular deadline used by corporations. If your company has a corporate tax account number with CRA, your company has 6 months to file a tax return. If your company owes taxes, a tax estimate along with a payment should be filed by March 31, 2020 to avoid penalties. If you made a tax estimate payment in March and had your actual return completed afterwards, you would either pay or receive a refund for the difference.
March 1, 2021 - T4 and T5's are due on the last day of February and if the last day is on a weekend, these slips are due on the subsequent business day. February 28, 2021 is on a Sunday, so the actual slips are due 1 day afterwards. If your business stopped operating, these slips are due within 30 days after the operations ceased.
March 31, 2021 - Assuming there are no announcements for tax extensions, corporate tax payments are due. If you cannot have your corporate tax return done by this time, we highly recommend completing a tax estimate and make the payment to avoid penalties.
April 30, 2021 - Personal tax returns are due.
June 15, 2021 - Self-employed returns are due.
June 30, 2021 - Corporate tax returns that have a December 31, 2020 year-end date are due.
If you have questions regarding these tax deadlines and how to prepare for 2021 taxes, please let us know.
Due to the impact of Covid-19, the Canadian Government has introduced several measures to assist employers during these challenging times.
One of the most popular programs for businesses has been the Canada Emergency Wage Subsidy (CEWS). This program allows companies to receive a cash subsidy from the government equivalent to 75% of the employee's wages for the first $58,700 per employee up to a maximum of $847 per week and there is no overall maximum for the employer.
CEWS is available to employers that are:
Not for profits and charities
In order to qualify, businesses first need to assess if their monthly revenue decreased by 30% compared to the same month in the previous year. Some changes were made after May 2020 however, the government still focuses on decrease in sales as their main gauge as to whether or not you qualify for the rebate. For entities that incorporate in 2020, the Canadian Government will allow you to compare monthly income to January or February of 2020.
CEWS program officially began in March 2020 and the Canadian government has announced it plans to extend the program until June 2021. Companies who have not filed previous period claims are allowed to file retroactively.
What we have noticed is that we have had several clients who were eligible for CEWS however, they did not apply for the program.
It is important to note that wage subsidy applications must be made on or before the later of:
January 31, 2021 and
180 days after the end of the claim period
For example, Claim Period #1 is from March 15 to April 11, 2020. The deadline to file the wage subsidy application for this Claim Period is January 31, 2021.
A common topic that business owners should frequently visit is whether to pay themselves a salary or dividend. This article will discuss the benefits and pitfalls of each option so owners of private owner-managed companies can compensate themselves accordingly in a way that best suits their current needs.
Under the Canadian tax system, the Federal and Provincial taxes are designed in a way that regardless if you pay yourself a salary, dividend or a combination of the two, the personal income tax should be similar. However, there are still some practical considerations that owners need to know about.
Why choose dividends
Under a salary plan, payroll tax remittances are required each month and a T4 needs to be prepared as well. If any of these are missed, there are heavy penalties. Under a dividend plan, only a T5 needs to be filed at the end of the year so there is less administrative work and risk of penalties.
Under a dividend plan, there is no need to pay the employee and employer's portion of CPP and EI therefore, there is more cash available for the owner and the company in the short term.
Dividends are simple to administer. A company can simply transfer cash from the company to a personal account.
Common pitfall of dividends
Not keeping track of withdrawals is the biggest issue we see in clients that choose dividends. Some clients lose track of how much cash they withdrew from the company during the year and at the end of the year when the T5 is prepared, they are shocked at a high personal tax bill that is going to be due in a few months time.
Why choose salary
Salaries can be declared to reduce corporate income tax down to the small business rate. This can help defer paying taxes at a higher corporate tax rate by delaying payment until April of the subsequent year after the personal tax is completed.
Salary increases your RRSP contribution limit and it accumulates each year. Contributions made in an RRSP reduces personal tax and income earned in the RRSP will be tax free until withdrawn.
Salaries allow an owner to contribute to CPP. If you choose to contribute to CPP, you will receive money back from the government once you have reached the minimum retirement age. The downside to CPP is that you will have to remit more payroll tax now but there will be more cash later.
Salaries allow an owner to contribute to EI. In the event that a owner becomes disabled, faced with involuntary job loss, or unable to work due to sickness, they are eligible to receive assistance from the government.
Common pitfall of salary
Not making remittances or making late remittances is the biggest issue we see in clients that choose salary. As noted above, CRA penalizes salary taxes the highest.
Common dividend vs salary scenarios
Depending on circumstances, there are some common situations we see and discuss what you should consider as a business owner:
Applying for loans and mortgages. If you are planning to purchase a home in the near future and need a mortgage to do so, it is advisable to pay yourself a salary rather than a dividend. Banks like to see borrowers that are able to demonstrate a steady stream of income. Once you have obtained the mortgage and would like to reduce payroll taxes, you can transition to a dividend plan.
Salaries can be paid to family members for work performed as long as the amount and type of responsibility is reasonable. This is an effective tax planning strategy by distributing income to family who are in a lower tax bracket. This strategy cannot be feasible under a dividend plan because dividends can only be declared to shareholders of the company and that may not be in your best interest. In addition, there are many tests under CRA tax on specified income (TOSI) rules for paying dividends to a spouse who is also a shareholder in the company.
We can help
There are many variables and considerations that need to be assessed when deciding to pay yourself through wages or dividends. We have significant experience in this area so give us a shout if you have any questions.
Good morning all,
First off, I would like to thank you all for visiting my website. Sincerely, I am extremely grateful! Please, keep sharing my website with all your friends and family out there!
For today’s post, we are going to be talking about Sole Proprietorship vs. Corporation. Lately, I have been getting many questions from prospective and current clients asking me things like “My friend told me I should incorporate my business, should I?” or “How should I set up my business and what are the differences.”
Well, truth be told, there are many pros and cons of being a sole proprietorship or setting up a corporation. I have attached an article from taxtips.ca (I lean on tax tips for any quick information I may need and you should too). While the tax rates may be a bit dated, the points are still very valid and relevant.
Choosing your business structure should not be based on one advantage or disadvantage. It is a decision that is carefully made considering all points.
Whether you are looking to start up a new business or an established business looking to change structures, please give me a call today and we can make sure you make an informed decision.