Personal tax accountant in Sherwood Park

Common forms on a Sherwood Park return: T4 and T4A slips, T5 slips for dividends, the T2125 for self-employment, rental schedules, RRSP receipts and instalment reminders from the CRA.

Who files what in Strathcona County

The returns we see from Sherwood Park fall into a few groups. There are employees of the large plant operators and contractors east of the city who also run a side business. There are self-employed tradespeople and consultants who have not incorporated yet and report their business on form T2125. And there are incorporated owners who pay themselves through a mix of T4 salary and T5 dividends from their own corporation.

Each group has a different set of decisions. The employee with a side business needs the two income sources reported correctly and the business expenses supported. The self-employed filer usually has a June 15 filing deadline but an April 30 payment deadline, and often owes instalments the following year. The incorporated owner has the most room to plan and the most to lose by leaving the decision until filing season.

Salary or dividends is a combined-rate question

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

Alberta’s personal tax structure has fewer provincial rate steps across a wide range of income than several other provinces, and no provincial surtax of the kind Ontario charges. For a Sherwood Park owner that means the combined marginal rate rises less sharply through the middle of the income range. The pure tax difference between salary and dividends is often modest, which makes the non-tax factors decisive.

The non-tax factors usually decide it

Salary creates RRSP contribution room and requires CPP contributions, which are a cost to an owner near retirement and a benefit to a younger one. Salary is also verifiable income for a mortgage lender, which matters to anyone buying a home or a rental property. Dividends avoid payroll remittances and can be declared after the year is over. None of these are tax arguments, and all of them regularly outweigh the tax difference. See CPP for incorporated owners and RRSP room versus dividends.

Not every dividend is taxed the same

A dividend paid from income taxed at the 11% small-business rate is non-eligible, with a smaller gross-up and credit. A dividend from income taxed at the 23% general rate can be eligible, with a larger gross-up and credit. Which one your corporation can pay depends on its own tax history, not on preference. A growing Sherwood Park company that has started paying the general rate on some income may be able to pay eligible dividends it did not know it had. See eligible versus non-eligible dividends.

The decision has a deadline

A salary needs payroll withholding through the year and a T4 slip after it, so it has to be decided before the fact. A dividend has more flexibility after the year end but is limited by retained earnings and by the tax on split income rules if it is paid to a spouse or adult child who is not active in the business. Neither is a filing-season decision. The useful conversation happens in the last few months of the corporation’s fiscal year.

Moving to Sherwood Park from another province

Plenty of Sherwood Park households arrived from another province for work, and a move changes the return. Your province of residence on December 31 generally decides which provincial tax applies to the whole year’s income. Some moving expenses may be deductible when you relocate to work or to run a business, provided the move meets the CRA’s distance test. A remuneration plan built on another province’s numbers needs to be re-run on Alberta’s.

What is covered

• T1 preparation for owners, spouses and dependants
• T2125 business and professional income, including vehicle and home-office claims
• Salary and dividend modelling against the corporation’s actual figures
• RRSP room and CPP trade-offs reviewed together
• Rental income and capital gains schedules
• Instalment review and CRA correspondence

A basic T1 starts at $100, and a self-employed return with schedules usually costs $250 to $450. The fee is written down before any work starts. See the published fees.

Remote, and there is no Sherwood Park office

EverStone is fully virtual and has no office in Sherwood Park or Strathcona County. Our CRA authorization lets us retrieve the slips already filed under your SIN, so you send only what the CRA does not receive. Returns are reviewed with you by email or video and signed electronically. See accounting for Alberta businesses.