Personal tax accountant in Okotoks

Who we prepare personal returns for in Okotoks

Most of our Okotoks personal files fall into three groups. The first is incorporated owners: consultants, tradespeople, practitioners and producers who pay themselves from a corporation and need the T1 and T2 to agree. The second is the self-employed who have not incorporated, reporting business income on form T2125 — often a home occupation that started small and is now a real business. The third is families where one partner owns a business and the other is employed, with T4 income, a T5 from investments, perhaps a rental, and decisions about who claims what.

The Town of Okotoks describes a community where many residents work in professional services, business and finance, or the trades, and where home-based businesses are common. That combination produces personal returns with real decisions in them. A single T4 with nothing else belongs in free software, and we will say so rather than send a quote.

Salary or dividends: a combined-rate question

Salary is deductible to the corporation and taxed personally as employment income, with CPP contributions and a T4 slip. A dividend is paid from income the corporation has already been taxed on, then grossed up on the personal return and reduced by a dividend tax credit, and reported on a T5. The system is designed so the two routes produce broadly similar total tax, but the match is never exact, and the gap depends on the owner’s province and on which corporate rate the income bore.

Alberta’s provincial layer is structured differently to the provincial layers in British Columbia or Ontario, with fewer rate steps across a wide range of income and no surtax computed on provincial tax. In practice that means the combined marginal rate rises less sharply through the middle range, and the pure tax difference between salary and dividends is often modest. When the tax gap narrows, the non-tax factors start to decide the answer.

The factors that usually decide it

Salary creates RRSP contribution room and requires CPP contributions, which is a cost to an owner near retirement and a benefit to a younger one building a pension. Salary is also income a lender can verify easily, which matters to an Okotoks family buying a house or refinancing. Dividends avoid payroll remittances and their penalties, can be declared after the year is over, and keep the administration light for a one-person company. None of those is a tax argument, and all of them routinely outweigh the tax difference. See CPP for incorporated owners.

Dividends are not all the same, either. A dividend paid from income taxed at the small business rate is non-eligible, with a smaller gross-up and credit. One paid from income taxed at the general rate can be eligible, with a larger gross-up and credit. Which kind your corporation can pay depends on its own tax history. See eligible versus non-eligible dividends.

The decision has a deadline

A salary has to be decided before it is paid, because source deductions are withheld and remitted through the year and the T4 follows in February. A dividend has more flexibility after the corporation’s year end, but it is limited by retained earnings and by the tax on split income rules if it goes to a spouse or adult child who is not active in the business. Treating owner pay as a filing-season decision removes most of the options before anyone looks at the numbers, which is why we look at it before the corporate year end rather than in April.

Self-employed in Okotoks: the T2125

A sole proprietor reports business income and expenses on form T2125 with the T1. The return is due June 15, but any balance owing is due April 30, and interest runs from that date. The schedule is where most of the judgement sits: the business-use share of a home office, the vehicle log that supports the kilometres claimed, equipment claimed through capital cost allowance rather than expensed, and the GST position if you are registered. A self-employed owner who owes more than a set amount two years running is also asked to pay personal instalments, and the first reminder from the CRA tends to come as a surprise.

At some point the question becomes whether to incorporate. That is worth deciding on numbers rather than instinct: the tax deferral only pays off if profit is left in the company, and incorporation adds a T2, an AT1, an Alberta annual return and a second set of books. When incorporating starts to pay sets out the break-even.

Families, slips and the CRA’s own data

Once we are authorized through Represent a Client, the T4, T4A, T5 and RRSP slips the CRA has received under your SIN can be downloaded directly, so you provide only what the CRA does not see: business records, medical and childcare receipts, donation receipts and rental figures. For a couple, we prepare both returns together so credits and deductions are claimed by the person who benefits most, and so pension income splitting, childcare expenses and donations are placed deliberately.

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

What is covered

One Chartered Professional Accountant handles the whole file:

• T1 returns for owners, spouses and dependants
• T2125 self-employment schedules, including home office and vehicle claims
• Salary and dividend modelling on the owner’s actual figures
• Eligible and non-eligible dividend capacity confirmed against the corporation
• Personal instalment review and CRA correspondence
• Coordination with the T2 and Alberta AT1 where there is a corporation

Remote, and there is no Okotoks office

EverStone has no Okotoks location. Engagements run entirely online — video meetings, secure upload and e-signature, including the T183 authorization that lets us file your return electronically. See accounting for Alberta businesses for the provincial picture.

Personal tax elsewhere in Alberta

The same service, online and at the same published fees, for owners in Calgary, Airdrie and Red Deer. Every Alberta city we serve is listed on the Alberta accounting page.