Accountant for White Rock consultants

A consultant still billing personally files a self-employed T1 with a T2125, which commonly runs $250–$450. For an incorporated consultant, monthly bookkeeping starts from $300 a month with GST filing included, and the corporate return is quoted after a free consultation. A 45-minute Advice Call is a flat $200 + GST if you want one question answered before signing a contract.

Incorporating: when it pays and when it does not

The tax saving from a corporation comes from one thing: profit left inside it is taxed at the small business rate until you take it out. A consultant who draws out everything the company earns pays close to the same total tax as a sole proprietor, plus the cost of running the company. That cost is real. There is a T2 and financial statements every year, a BC annual report, a corporate bank account and usually payroll.

The picture changes when billings run well ahead of what the household spends. Then the money left in the company can wait for a lower-income year, such as the first years of retirement, before it is paid out. We model both paths on your actual rate, hours and spending before you register anything. Should I incorporate sets out the trade-off.

When one client is effectively your employer

A common peninsula pattern is a professional who leaves a firm and comes back the next month as its consultant. The desk, the manager and the hours are the same; only the invoice is new. The CRA asks a simple question about that arrangement. Without the corporation in the middle, would you reasonably be regarded as the client’s employee? If the answer is yes, the corporation is carrying on a personal services business.

The cost is heavy. The small business deduction is lost on that income, most expenses stop being deductible, and an additional federal tax applies. A reassessment usually reaches back several years at once. What helps is substance, not wording: more than one client, fees tied to deliverables rather than hours, your own equipment, and the freedom to send someone else to do the work. Our free PSB risk assessment walks through the factors, and the worker classification guide explains how the CRA weighs them.

GST, and clients on both sides of the border

Once taxable revenue passes $30,000 in four consecutive calendar quarters, GST registration is mandatory, and most full-time consultants cross that in their first year. Registration also recovers the GST on your laptop, software and professional fees as input tax credits. Services supplied to a client outside Canada can be zero-rated in defined circumstances, which still lets you claim input tax credits. That depends on who the client is and where the service is used, so we check each US contract rather than assume. Consulting services are generally not subject to BC PST, though some related services are. Zero-rated versus exempt supplies explains the difference.

Billing in US dollars

Invoices to American clients are often in US dollars and paid weeks later. The revenue is recorded at the exchange rate on the invoice date, the receipt at the rate when it lands, and the difference is a foreign exchange gain or loss. A US dollar bank account kept on its own ledger makes that simple. Some US clients ask for tax forms before the first payment; those are worth sending to us before you sign them. If your corporation’s foreign property passes the reporting threshold, a T1135 goes with the return.

Travel to a client south of the border is a business expense when the trip is for the work, with meals only partly deductible. Keep the itinerary and the purpose with the receipts. A car used for client visits needs the same log of business kilometres a realtor keeps.

Paying yourself, and the year-end

An incorporated consultant can take salary, dividends or both. Salary runs through payroll with a T4, builds RRSP room and CPP, and stays deductible to the company even where the PSB rules bite. Dividends skip payroll and arrive on a T5, but they create no RRSP room. We rework the mix each year as income and plans change. The salary versus dividends calculator shows the trade-off, and payroll in White Rock covers the remittances.

The year-end has two judgement calls. Work finished but not yet invoiced is still that year’s income. A home office used for the business can be reimbursed by the company under a written arrangement, sized to the space you really use. Corporate tax in White Rock covers the T2, due six months after year-end.

Consulting in semi-retirement

Consulting income on top of a pension changes the personal return. It can push net income past the point where Old Age Security begins to be recovered, and it brings CPP contributions on self-employment earnings. Incorporating can let some of that income wait in the company until a lower-income year. Pension splitting with a spouse still applies to eligible pension income. Personal tax in White Rock covers the pension side of the same household.

What EverStone handles for you

One CPA, one fixed fee agreed up front:

• Incorporation decision modelled on your real income
• PSB exposure reviewed against your contracts
• GST registration, invoicing set-up and returns, including US clients
• T2 and year-end financial statements
• Salary and dividend mix recalculated each year
• Your personal T1 coordinated with the corporation

Remote accounting for consultants from Abbotsford

EverStone works with White Rock and South Surrey consultants virtually, from a base in Abbotsford. There is no White Rock office and nobody on the ground there. Invoices, receipts and contracts come in through a secure upload link, questions go by email, and a video call is arranged when it helps. See what it costs.