Personal tax accountant in Maple Ridge

Three places to put a surplus dollar

An employee saving money has effectively two choices. An incorporated owner has three, because the corporation itself is a place money can stay. Each behaves differently. A registered retirement plan contribution reduces taxable income now and is fully taxable on withdrawal. A tax-free account gives no deduction now and produces nothing taxable later. Money left in the corporation is taxed at corporate rates now and again personally when it comes out. None of the three is universally better, and the honest comparison depends on the owner's current marginal rate, expected rate at withdrawal, and how long the money will sit. What makes this an owner's decision rather than a general one is that the corporation route only exists if the money is never drawn — and drawing it is what created the choice in the first place.

The room has to be created before it can be used

Registered retirement plan room is generated by earned income, principally salary, at a set percentage up to an annual maximum. Dividends generate none. An owner who has drawn dividends exclusively therefore has a savings option that is closed to them, not because of any rule about business owners but because the input that creates the room was never present. Tax-free account room accrues to every adult resident regardless of income, which makes it the one savings channel unaffected by how an owner pays themselves. That asymmetry is worth knowing before a remuneration policy hardens into a habit that runs for a decade.

Deferral is only worth something if the rate falls

The case for a registered plan rests on deducting at a higher rate than the rate that will apply on withdrawal. For an owner whose income is unusually high in a given year and expected to be lower in retirement, that gap is real. For an owner whose income is modest now and who expects a substantial corporation to be paying them out later, the gap can be small or can run the wrong way. Because an incorporated owner has some ability to control their personal income in both periods, this is one of the few cases where the assumption underlying the standard advice can actually be tested rather than guessed. See leaving money in the corporation or paying it out.

What retaining earnings costs and what it buys

Retained active business income is taxed at corporate rates, leaving more capital working than an equivalent amount drawn and taxed personally. The offsetting considerations are that investment income earned inside the corporation is taxed less favourably than the same income earned personally, that accumulating passive investments can reduce access to the preferential corporate rate on active income, and that the money is still subject to personal tax whenever it eventually comes out. It also sits inside an entity exposed to business creditors. See investment income in a corporation.

The contribution and the return are separate events

A registered contribution made in the first sixty days of a year can generally be applied against the prior year or carried forward, which gives some ability to place the deduction in the year where it is worth most. That is a real planning point for an owner with uneven income: a contribution does not have to be deducted in the year it is made, and holding a deduction for a higher-income year is entirely legitimate. Deducting reflexively in the year of contribution wastes that flexibility. See RRSPs versus dividends for business owners.

What is covered

One Chartered Professional Accountant handles the whole file:

• T1 preparation coordinated with the corporate return
• Contribution room reviewed against the remuneration plan
• Registered, tax-free and corporate retention compared on actual figures
• Deduction timing where income is uneven between years
• Passive income review at the corporate level

Remote, and there is no Maple Ridge office

EverStone has one office, in Abbotsford, and no Maple Ridge location. The engagement is delivered online — video meetings, e-signature and secure document upload — which for a conversation that is mostly about numbers on a screen is the natural format.