The CRA is now checking on your company and payroll taxes!
URGENT AND IMPORTANT
Do you feel secure about your payroll?
SOURCE DEDUCTION
Starting from 2009, we respectfully request that all shareholders/employees working for their own corporations be put on payroll. The reason for this drastic measure is due to current developments, courtesy of CRA which hired several hundred new auditors to review corporation returns. They are comparing the management fee to the shareholders to match their reported income in the personal income returns. For years, they allowed income to be reported when the income tax was filed, except in the case of income over $30,000.00, then they asked either to register for GST or put on payroll. Now, they demanded shareholders/owners to start remitting payroll amounts on a monthly basis instead of declaring a single bonus to cover the total of annual draws.
In at least one instance, a shareholder/owner filed his 2007 income tax return, paid all appropriate taxes; and was assessed in compliance. We want to spare you the details, but if anyone is interested in it, we will gladly share with you. However, this latest development has a far-reaching effect in terms of tax planning, and filtering through information to WSIB and EHT. The message from CRA is: unless you have advances to draw from, otherwise, when you take money out of the company, you should withhold source deduction and submit to CRA in the following month.
Keeping current will allow us to complete your financial statements in a timely basis; enable us to properly assess and propose the appropriate amount of monthly remittance to keep the taxman happy. By the way, by following this route, you will find it a lot easier by the time income tax time comes around, because you would have paid taxes for your earnings. And then, for some of you, there could be various amount of income tax refund depending on your circumstances.
We will be contacting some of you (who are not on payroll) at some point to discuss with you on how to go about doing this. At the beginning, there will be some confusion due to the fact that you have to play catch up because it is already middle of the year. We suggest for 2009, as an alternative, to pay at least for CPP. With 2010, start from day one, it will be less and less painful. The important thing is to start the process. We like to make sure everybody is on board for 2009 since CRA has started the process for 2006 and then will proceed with 2007, 2008 and so on.
LIFE STYLE ASSESSMENT
Simply put, CRA can look at what you have and the kind of life you lead to say you actually make such and such amount of money vs. to what was reported. At the end, what we are witnessing, unfortunately, is more of the US style of treating tax matters. Remember, the IRA could not nail Al Capone on his other activities, but they got him on tax fraud. It is not a pleasant thing we have to deal with, but be prudent, it is always the best offensive.
