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CPA Help – Dividend or Salary Decision to Avoid CRA Audit Toronto

Business owners often wonder whether they should pay themselves and family members a salary or dividends. Which is the most tax efficient? Does one risk a CRA Audit Toronto? A Chartered Professional Accountant can help you decide which payment type to choose to save taxes and reduce the risk of a CRA Audit Toronto.

As with most things in life, there is no simple answer that is best for all people at all times. Whether paying dividends or a salary is best, depends on your personal and family circumstances, the corporation’s income source, as well as the legal structure of your business. When a corporation pays you and family members a salary, the corporation can deduct that amount for income tax purpose. But, the corporation, as employer, has to withhold taxes and may have to also have to pay and deduct CPP and EI contributions (as well as other payroll taxes). The amount you receive is fully included in your income and taxed. However, when a corporation pays out dividends, it can’t deduct it form its income. Dividends are after-tax. When a shareholder receives a dividend, the dividend is grossed up and the shareholder receives a dividend tax credit (amount depends on the kind of Dividend). Some dividends are not taxable at all. A Chartered Professional Accountant can calculate which is best for you each year.

Paying your family salary of dividends can result in a CRA Audit Toronto. There are limits on when and how much can be paid out to family members that a Chartered Professional Accountant can help you understand. The tax act is complicated and there are many ways to pay out income from a corporation. Save taxes by asking a Chartered Professional Accountant to optimize your payouts and avoid a CRA Audit Toronto by making sure it is done right.

pro-tip

Pro Tip

ACCESSING THE SMALL BUSINESS DEDUCTION IN YOUR BUSINESS

The Small Business Deduction gives businesses a tax deduction on the first $500,000 of income. This saves an eligible corporation around up to $50,000 in income taxes. There are a number of conditions that have to be met to be eligible for this deduction.

Testimonial

Sam Faris reduced the significant unreported income based on net worth audit to be nil. Sam’s approach in fighting these types of complex audits is unique and sophisticated. He found countless mistakes made by the auditor which were rectified when Sam appealed the audit decision. Instead of owing significant amount of taxes, Sam reduced it to zero. I highly recommend to hire Sam for this type of audits and any CRA problem.”

E.M., Ottawa
pro-tip

Pro Tip

ACCESSING THE SMALL BUSINESS DEDUCTION IN YOUR BUSINESS

The Small Business Deduction gives businesses a tax deduction on the first $500,000 of income. This saves an eligible corporation around up to $50,000 in income taxes. There are a number of conditions that have to be met to be eligible for this deduction.