The most obvious disadvantage stated by tax accountant Toronto team about paying yourself a salary from your firm is that since your business income is 100% taxable if your taxable income rises into a higher tax bracket, your tax bill will go up.
As both the employer and employee, you’ll be responsible for CPP contributions.
Treating yourself as an employee entails keeping track of your payroll records and creating a Payroll account with the CRA. T4 slips must be issued after the end of the year.
Tax accountant Toronto team state that not contributing to CPP would lower your CPP benefit when you retire. You can’t contribute to an RRSP if you don’t have employment income.
You will lose some personal income tax deductions, such as child-care expenses, if you receive dividends instead of a salary.
Choosing among these alternatives entails weighing the advantages and disadvantages of each. As a result, tax accountant Toronto speculate that picking one of these methods is based on the following criteria:
It’s tough to figure out the influence of these variables on each alternative, so it’s best to get expert guidance from a professional accountant or tax specialist.
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TY Peak is a well-established firm with an extensive list of clients that have come to appreciate their professional and comprehensive approach. The TY Peak team provides accounting support for small businesses, corporations as well as personal taxes in Toronto.