Personal tax accountant in Mission BC

Two ways to pay a spouse, two entirely different tests

A corporation can pay a family member a salary or a dividend, and the two follow very different rules. A salary is deductible to the corporation and taxable to the recipient; the question is whether it is reasonable for the work performed. A dividend is not deductible, and the question is whether the tax on split income rules apply, which can push it to the top personal rate whatever the recipient’s other income. Treating the two as interchangeable stopped being accurate several years ago.

Reasonable means what a stranger would have been paid

A salary to a spouse is deductible to the extent it is reasonable, and the test is what the corporation would have paid an unrelated person for the same work. The defence is documentary: a role description, hours worked, and a market rate. Where the work is real — bookkeeping, scheduling, quoting, dealing with suppliers — this is straightforward. Where nobody can describe the work, the deduction is at risk and the income is still taxed. See paying a spouse a salary.

Split income, and the exclusions that survived

The tax on split income rules apply to certain amounts, including dividends, received by family members from a private corporation connected to a related business. Where they apply, the amount is taxed at the highest personal rate and most personal credits cannot shelter it.

The rules have several defined exclusions: for a person involved in the business on a regular, continuous and substantial basis, for certain ages and circumstances, and for returns on capital contributed in defined ways. They are specific and fact-driven, so settle the question before dividends are declared. See the tax on split income guide.

Payroll obligations arrive with the salary

Salary brings the corporation into payroll: source deductions remitted on a schedule, slips filed after the calendar year ends, and strict penalties for late remittance. The spouse also earns RRSP room and contributes to the public pension plan, a benefit or a cost depending on the household’s age and savings. None of this argues against salary; it argues for deciding with the whole picture. See payroll remittances and the RP account.

What this looks like across two returns

Once a spouse is paid, the household has two personal returns that are connected through the corporation, and several claims — dependant amounts, childcare, medical, donations — whose optimal placement depends on the income split that was chosen. Deciding the remuneration in isolation and then trying to optimize the returns afterwards inverts the order. The better sequence is to know what the household wants the two returns to look like and then set the corporate payments to produce it, within what the rules allow.

What is covered

One Chartered Professional Accountant handles the whole file:

• Salary reasonableness review and supporting documentation
• Split-income analysis before dividends are declared
• Payroll registration, remittances and year-end slips
• Both personal returns prepared together with the corporate return
• Household credit placement given the chosen income split

Remote, and there is no Mission office

EverStone works online and has no Mission location. The engagement runs entirely online — video meetings, e-signature and secure document upload, which for a household discussion involving two people and a corporation is usually easier to schedule than a shared trip to an office.

The moment there are employees, payroll in Mission becomes the recurring obligation.

Owners who need fractional CFO in Mission as well will find it on the same terms.

Where the same file also needs our Mission bookkeeping page and getting the Mission returns filed, that is handled in one engagement.