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Scholarships Payable to Family through Your Business Lisa Patrick

We have recently determined that a business may pay a scholarship to a staff member or their family members.  This would be a taxable benefit in some situations to the family member.

If the family member meets certain criteria, he or she may be able to exclude the amount from income on his or her income tax and benefit return. Any questions about the T4A slip issued to the family member, you can refer them to Scholarships, fellowships, bursaries, study grants, and artists’ project grants http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/ncm-tx/rtrn/cmpltng/rprtng-ncm/lns101-170/130/schlrshp-eng.html , or to their General Income Tax and Benefit Guide.

For more information please follow this link to Tuition fees, scholarships, and bursaries
http://www.cra-arc.gc.ca/tx/bsnss/tpcs/pyrll/bnfts/dctn/ttn-eng.html


Salary or Dividends? Lisa Patrick

Wages vs. Dividends

If you own an incorporated business, there are two primary ways to pay yourself:

Salary and/or Dividends.

If you pay yourself a 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.

Some Advantages:

  1. Salary is treated as earned income for RRSP purposes.
  2. Salary is ‘provable income’ for financing purposes. If you are planning on applying for a line of credit or a mortgage, then paying yourself a salary will help you to qualify.
  3. Salary is subject to Canada Pension Plan (CPP) premiums. By paying into the Canada Pension Plan your entitlement to CPP will increase.

If you pay yourself a dividend, you must first understand what a dividend is.

Dividend is the return on investment from the business you invested in. They are payments made to company shareholders from the profits of the company.

They provide you the opportunity to have the income taxed in your corporation and then pay the after-tax earnings to yourself, as dividends, which is not deductible for the corporation.

Some Advantages:

  1. Dividends are taxed at a lower rate than salary. 
  2. Dividends are not subject to CPP premiums, which can add up to big savings.
  3. Dividends are administratively simple. You do not have the burden that you do with payroll.  To pay yourself a dividend, you simply write a cheque to yourself from your corporation.

4.    Can be paid to individuals who are not employees of the company (They must be shareholders).

5.    No payroll process.

NOTE: in order to pay yourself dividends your articles of corporation must allow for dividends to be paid.

When deciding it is not a cookie cut answer and every business must make a decision based on the information above and the further additional following information that is relevant to their business and personal finances:

1. # of employees - are you an employee of your company?

2. other personal income outsides of the business

3. profit vs loss

4. best income tax rate

5. whether RRSP contributions are a consideration

Before making any decisions please contact your tax accountant to discuss further.  In the event you do not have a tax accountant please contact us for a free ½ hour consult.


Do you apprentice employees? Lisa Patrick

Canada Revenue Agency has a tax refund that you may not know about or are  not utilizing correctly.  Since May 1, 2006 Canada Revenue Agency implemented the T2038.  Which states that if you are an employer who has paid up to $20,000.00 for a maximum of 24 months, apprentices will qualify for a 10% tax credit.    There is a maximum of $2000 tax savings for the business (employer) of all apprenticeship per year.

Provide your tax accountant the information via this chart below per year via email if you choose per employer since May 1, 2006.

Apprenticeship T2038

Employee Name

Contract Apprenticeship Number

Social Insurance Number

Name of Eligible Trade

Eligible Salary & wages after any reimbursed

amount by alternate government programs.

     
     
     

Please click here for the T2038 information provided by Canada Revenue Agency; Investment Tax Credit (individuals).  Code 6 Apprenticeship job creation tax credit.


You hired them as a contractor and the government has decided they are an employee... NOW WHAT?? Lisa Patrick

 This could bankrupt the smallest of companies..
Protect yourself, make informed decisions when you hire someone…
Hope this helps, right from the governments website….

Guide at Canada Revenue specifically lists qualification issues..

RC4110 - Employee or Self Employed? www.cra-arc.gc.ca/E/pub/tg/rc4110/README.html

Some major points for discussion with worker …
1.
                 control of her/his hours and not routine to your scheduling
2.
                 bring her/his tools for the job
3.
                 replacement worker acceptable based on her/his decision
4.
                 risk of loss of income if she / he errors
5.
                 invoice provided with service detailed
6.
                 watch workers compensation., if worker not have and you hired her/him you are accountable for the workers compensation.

If you require information for payroll from the government:

PDOC, payroll tables, TD1 and more: www.cra-arc.gc.ca/tx/bsnss/tpcs/pyrll/tbls-eng.html


We Invite You! Lisa Patrick


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