Corporate tax accountant for Maple Ridge corporations

The compensation decision sets the return

A one-owner corporation in Maple Ridge — a trades company, a small services firm, a consultancy run from a home office — usually has one large discretionary number on its income statement, and that is what the owner takes out. Salary is a deduction to the corporation and employment income to the owner. Dividends are not deductible and are taxed differently in the owner’s hands. The corporate return therefore looks entirely different depending on a decision that is often made informally during the year and rationalised afterwards. Making it deliberately, before the year closes, is the difference between planning and reporting. Salary versus dividends works through the comparison.

What salary buys and what it costs

Paying salary creates RRSP contribution room and Canada Pension Plan contributions, and it produces earned income that supports personal borrowing in a way dividends do not. It also requires a payroll account, source deductions remitted on schedule, and T4 reporting, and it brings the corporation into the BC employer health tax calculation once annual BC remuneration passes the threshold. Dividends avoid all of that administration and the CPP cost, at the price of the benefits it buys. Neither answer is universally right; what makes it a corporate tax question rather than a preference is that the corporation’s taxable income moves with it.

The shareholder account nobody reconciles

The most common defect in an owner-managed file is a shareholder loan account that has become a dumping ground — personal purchases on the company card, cash taken during the year, a vehicle payment, an expense reimbursed twice. Left alone it becomes a balance owed by the owner to the company, and that has a hard consequence. Under subsection 15(2) of the Income Tax Act a loan from the corporation must generally be repaid within one year after the end of the corporation’s taxation year in which it was made, or the full unpaid balance is added to the owner’s personal income. Shareholder loans sets out the rule and the ways around it.

The truck the company bought

A vehicle owned by the corporation and used personally creates a taxable benefit to the owner, and the benefit is calculated on a basis that is often more expensive than owners expect. The alternative — owning the vehicle personally and having the corporation reimburse business kilometres at a per-kilometre rate — is frequently simpler and cheaper for a work vehicle with meaningful personal use. Either way the deciding evidence is a mileage record kept during the year, not an estimate produced afterwards. Vehicle deductions covers both routes and what has to be recorded.

Paying a spouse who actually works

Paying a family member from the corporation is legitimate where the work is real and the amount is reasonable for what was done. It is also one of the more frequently reviewed deductions in a small corporation, and the defence is documentary: a record of hours or duties, a payment that actually moved, and payroll reporting consistent with it. Dividends to family shareholders raise a different question entirely, because the tax on split income can apply the top marginal rate to a dividend paid to a family member who does not meet one of the exceptions. Paying a spouse a salary covers what has to be true.

The home office and the corporation

A Maple Ridge owner running the business from a home office cannot simply deduct a share of the house in the corporation, because the corporation does not own or rent the home. The workable routes are a reimbursement of a reasonable share of actual costs supported by a calculation, or a rental arrangement between owner and corporation with the corresponding income reported personally. Both need to be set up on purpose. British Columbia’s combined rates of 11% and 27% then apply to whatever taxable income remains. Home office through a corporation covers the options.

How the engagement runs

EverStone is a sole practitioner CPA firm working from one office at 32615 South Fraser Way in Abbotsford. There is no Maple Ridge office and no local staff, and the work is done remotely: secure upload, a video call to walk through the compensation decision before the year closes, e-signature and electronic filing. For an owner-managed file the arrangement has an obvious advantage — the CPA weighing salary against dividends is the same person preparing both the corporate and the personal return, so the two are decided together rather than in sequence by different people.