Important CRA update that might affect you and how your business pays you!

CRA has recently started enforcing provisions in the Income Tax Act. In order to avoid penalties and prosecution action, income tax must be withheld from employee's remuneration as required by subsection 153(1) or section 215. The penalty will be deducted on the amount of tax that should have been deducted. The initial penalty is 10% of what should have been deducted for the 1st offence, the second offence is 20% and there is also additional fines and potential imprisonment. What does the changes/policy mean to me as a business owner? Every business owner must remit the tax attributed to their own salaries or bonuses at the same time that they do their remittances for their employees. If you pay all of your personal taxes at the end of the year or through installments this poses a problem:

1) Tax on your own income (as a business owner) is due monthly independent of cash flow.

2) You have to declare whether your draw is salary or bonus (with tax due at that time) or a dividend.

3) CPP remittances have to be determined and paid on a monthly basis on your business owner salary or bonuses. How can I manage this? The use of an Employee Profit Sharing Plan (EPSP) means that the changes will have very little impact on you and your tax position. The flexibility and savings offered by an EPSP continue. Why? 1. The salary component of an EPSP is nominal. The taxes you will be required to remit will not cause a significant impact to cash flow. 2. Using the Trust can limit your CPP liabilities. 3. Using the Trust allows you to split income with your spouse if they are listed as a designated beneficiary under the EPSP.

4. There have been no amendments to the Tax Act to date that affect EPSP's.

You've got your investments covered but are you covered?

Did you know that if you are 45 years old an currently making $90,000 a year that your projecting earnings to age 65 is $2,299,019. (assuming a 2.5% increase on a yearly basis.)  If you are currently making $150,000 a year your projected earnings to age 65 is $3,831,699!

You are planning for retirement by putting money into RRSP's, TFSA, Group Pensions and Individual Pensions etc... BUT, are you planning what to do if you could no longer contribute to these investments or if you could no longer pay your bills?

Highlighting Private Health Spending Accounts - featuring Custom Care

There are only 3 ways to pay for Health/Dental Expenses

Paying out of pocket
Traditional Insurance with monthly premiums
Your company paying these expenses by using a Private Health Services Plan
If you are interested in $1.00 for health care expenses instead of $1.60