Reducing Taxes Through Dividend-Salary Mix Calculations
Should I take wages or dividends from my privately owned corporation? What is the best way of taking money out of my company? In other words, what will result in the least amount of income taxes?
A Canadian accountant will perform a dividend-salary mix calculation to determine the best way of withdrawing money from the corporation.
Even though Canadian income tax laws are different from other jurisdictions, some of the same principles of tax planning will still apply.
In order to qualify for Canada Pension Plan (C.P.P.) benefits or to make Registered Retirement Savings Plan (R.R.S.P.) contributions, there must be some earned income. This requires the payment of wages. In fact, many accountants will make sure that their clients have maximized their C.P.P. and R.R.S.P. contributions for the year in order to ensure sufficient future retirement benefits, even if it costs a little more in income tax and/or payroll taxes.
On the other hand, the Dividend Tax Credit reduces the tax payable on dividends received from the corporation, since the corporation has already been taxed on its income. Therefore, the accountant may recommend that the corporation pay some dividends.
Sometimes, if the owner doesn't require the cash, the income is simply retained inside the corporation and tax is paid at the lower small business rate by the corporation. If the corporation had income in excess of the Small Business Deduction, it likely would pay it out in wages.
Depending on the circumstances of the taxpayer, wages may be the least expensive way of taking money out of the corporation. Sometimes, dividends are better. Generally, a mix of both is required.
An accountant will have to balance many factors to come out with the optimal mix for you. He will consider your family situation, other income sources, losses, investment and retirement objectives, et cetera. Keep in mind that the lowest possible tax bill for the current year is not always in your best interests.
RESOURCE BOX:
J. Stephen Pope, President of Pope Consulting Inc., http://www.popeconsultinginc.com/ has been helping clients to earn maximum business profits for over twenty-five years.
For valuable Work at Home Small Business Ideas, visit: http://www.yenommarketinginc.com/
For more information about income taxes, visit http://www.yenommarketinginc.com/income-taxes_business_personal_taxes.php
Warning: include(inc/ads-body.inc) [function.include]: failed to open stream: No such file or directory in /home/accounta/public_html/44225_business_personal_taxes.php on line 94
Warning: include(inc/ads-body.inc) [function.include]: failed to open stream: No such file or directory in /home/accounta/public_html/44225_business_personal_taxes.php on line 94
Warning: include() [function.include]: Failed opening 'inc/ads-body.inc' for inclusion (include_path='.:/usr/lib/php:/usr/local/lib/php') in /home/accounta/public_html/44225_business_personal_taxes.php on line 94
MORE RESOURCES:
 New Era | Bank helps train accountants - by Staff Reporter New Era WINDHOEK – Two years ago, FNB Namibia joined hands with the Institute for Commercial and Financial Accountants of Namibia (CFA). ... |
 Sky News | Accountants PWC UK to create 800 new jobs Reuters UK LONDON (Reuters) - PricewaterhouseCoopers UK (PWC) PWC.UL, one of Britain's four biggest accountancy companies, announced plans on Monday to create 800 new ... PwC to axe final salary pensions PricewaterhouseCoopers has got 800 new jobs! At least 34 involve financial ... |
 Telegraph.co.uk (blog) | ACCA calls time on current nature of PAYE Director of Finance online The revelation that HMRC has made PAYE miscalculations has prompted ACCA - the Association of Chartered Certified Accountants - to call for the UK tax ... Tax 'nightmare' could get worse for 40m on PAYE Editorial roundup: Reform must follow PAYE overpayment fiasco GST likely to keep rising, says visiting tax expert |
Fifty jobs lost at Buckfastleigh building firm BBC News Bishop Fleming Chartered Accountants have been appointed as the liquidators. In a statement they said: "Due to difficult trading conditions the company ... UP TO 50 jobs are thought to have been lost after one of the South West's ... |
 FinanceNews.co.uk | Demand for accountants surges over summer Accountancy Age Demand for accountancy staff raced bucked the trend of a flat jobs market over the summer, with positions for pre-qualified accountants at their highest ... Huge Demand of New Jobs in Leisure, Tourism, and Accountancy Sectors |
Michigan Association of Certified Public Accountants Elects Lori Kerch to ... dBusinessNews Detroit (press release) Detroit - The Michigan Association of Certified Public Accountants (MACPA), has announced that Lori B. Kerch, CPA has been elected as a new member of its ... The Michigan Association of CPAs Elects New Board for 2010-2011 |
KB Home:SEC accounting probe done, no action taken BusinessWeek The Securities and Exchange Commission has completed its investigation into possible accounting violations by KB Home and does not intend to recommend any ... KB Home says SEC investigation over |
New Marcellus money demands professional advice Scranton Times-Tribune The Marcellus Shale rush didn't change the client base for Tunkhannock certified public accountant Paul Sidorek. ... |
 FavStocks (blog) | Four Ways To Find A Good Accountant To Help You FavStocks (blog) By Hank on 09/06/2010 – 5:06 am PDTLeave a Comment Lately I have found myself in need of a good accountant, and I am having trouble finding one. ... |
Accounting Board Seeks Public Proceedings Wall Street Journal The Public Company Accounting Oversight Board's proposal would repeal a requirement that its disciplinary actions remain secret, according to a copy of the ... |
Tax Secrets - How Drew Miles Helped Me
How about a Tax Tip?As we all know Taxes are a necessary evil. While none of us like paying taxes there are many strategists out there that can make your life a lot easier when that dreaded day arrives.
Estate Taxes - It Pays to Plan Ahead
Estate taxes. It's not enough to simply know they exist, and to know strategies to minimize them.
Seven Key Tax Deductions for the Self Employed
As a sole proprietor, it's wise to familiarize yourself with the some key deductions that may reduce your tax bill for 2004.Small-business consultants generally recommend that you hire an accountant to prepare your tax returns, payroll and financial statements.
Organizing Your Taxes
Does this scene sound familiar? It's April 7. You haven't seen the top of your dining room table in two weeks because of the piles of paid bills, receipts, canceled checks, and unidentified cash register receipts covering it.
Home Based Business Tax Deductions
Running a home based business reaps many wonderful tax deductions that other businesses some times may not claim. Unfortunately to many small business owners end up paying the government taxes every year because they are unaware or several small business deductions that are available.
Paying Workers - What Can You Write-Off?
As your business grows, you are going to need help. This help comes in the form of employees and independent contractors.
Car Donation: An Easy Way to Support Your Favorite Charity and Get a Tax Deduction
Most people look forward to getting their tax return, but one of the downsides to filing taxes is that you may find yourself owing the taxman come April 15. What do you do when you realize that you not only owe money, but you owe more than you can pay at the time?The answer is: charitable deductions.
Tax Tips for Home-Based Business Owners
As tax time approaches, many home-based business owners begin completing their forms or paying their accountants with trepidation. This nervousness comes from two sources: a fear of being audited and a fear of having to pay a lot.
What to Do If You Can't Pay Your Taxes
The end of tax filing extensions is quickly approaching. What do you do if you can't pay the amounts you owe? You should still file your return by the due date and pay as much as you can.
Employment Taxes - Depositing With The IRS
If your business has employees, you must pay employment taxes. The payment system can be a bit confusing, so this article discusses how to go about depositing employment taxes with the IRS.
Early Distributions From Retirement Plans
An early distribution from an Individual Retirement Arrangement (IRA) or a qualified retirement plan need not be a "taxing" experience. Fortunately, there are exceptions to early distributions.
What Is Tax Law?
The federal tax code is complex. This complexity generally arises from two factors: the use of the tax code for purposes other than raising revenue, and the feedback process of amending the code.
Navigating The Internet Sales Tax Laws
QUESTION: I have been contacted by my local city government to say that my business is scheduled to be audited to determine if I owe any sales tax from items purchased on the Internet. Can they really make me pay this tax? I thought you could buy things online tax free? -- Katie R.
Back To School - Educators Deduct School Expenses
As teachers and students head back to school following a glorious summer, it's time to remind teachers to organize 2004 school expenses. Under a temporary tax code change, teachers can deduct certain school-related expenses from adjusted gross income.
Tax Records - What You Should Keep And For How Long
Many taxpayers are confused about how long they should keep tax records. The term "tax records" refers to your tax returns and the documents that support the information in the returns.
Business Tax Loophole: Leasing Assets To Your Corporation
While there are many equally valid reasons to incorporate, saving money on taxes is a consideration that can yield relatively immediate results. Leasing assets to your corporation is a tax strategy you should absolutely consider if you already have a corporation or are thinking about forming one.
Deducting Points On Home Refinances
Deduction of Refinance PointsAny points that you pay in the refinancing of your residence are tax deductible over the length of the loan in question. The deduction is allowable only if the residence is your primary home and the new mortgage replaces a previous one and/or is used to improve the residence.
IRS Statute of Limitations: Do Taxes Ever Expire?
Many Americans believe that an IRS debt is a debt for life and that the tax collector can hound them to the grave. Thankfully, that is not the case and there are statutory time limits on the ability of the IRS to examine and collect taxes.
History Of The Federal Income Tax
The powers of Congress, and the limitations set upon those powers, are set forth in Article I of the United States Constitution. Section 8 specifies both the power to collect, "Taxes, Duties, Imposts and Excises," and the requirement that, "Duties, Imposts and Excises shall be uniform throughout the United States.
How Home-Based Businesses Can Avoid Giving Uncle Sam More than His Share
How Home-Based Businesses Can Avoid Giving Uncle Sam More than His Share By Darren Oliver With the rush to file your taxes by April 15th, you probably did not consider the possibility that you overpaid. According to the General Accounting Office, in 1998 alone, there was $311 million paid unnecessarily to the IRS.