Personal tax accountant in Toronto

A tax calculated on a tax

Most provinces compute personal tax by applying rates to taxable income and then subtracting credits. Ontario does that and then adds a surtax computed as a percentage of the basic provincial tax payable itself, in tiers, once that amount passes defined levels. The distinction between a tax on income and a tax on tax sounds academic and is not. Because the surtax multiplies provincial tax rather than income, anything that increases provincial tax increases the surtax with it, and anything that reduces provincial tax — including non-refundable credits applied before the surtax is computed — reduces the surtax as well. A credit in Ontario is therefore worth more than its face rate suggests, and an additional dollar of provincial tax costs more than the marginal rate implies.

Why this matters more for dividends

A dividend is grossed up before tax is calculated and then reduced by a dividend tax credit. In a province with a simple rate-times-income structure, those two steps largely offset in a predictable way. In Ontario, the gross-up raises taxable income, which raises basic provincial tax, which raises the surtax — and the dividend tax credit then reduces provincial tax and therefore the surtax as well. The two effects do not cancel neatly, and the net result is that the crossover point between paying salary and paying dividends sits in a different place in Ontario than it does in a province without a surtax. An owner who relocates and keeps the same remuneration policy is not keeping the same outcome.

The health premium is a separate line

Ontario also levies a health premium paid through the personal income tax system, calculated by reference to taxable income and stepped rather than proportional. It is not a credit-reducible amount in the ordinary sense and it is not part of the surtax calculation. For an owner, the practical consequence is that it responds to taxable income — including the grossed-up amount of a dividend rather than the cash received — so it is another item that reacts to the composition of income and not only its size. The distinction between eligible and non-eligible dividends changes the size of the gross-up.

The federal half is the same everywhere

None of this touches the federal return, which is computed identically for a resident of Toronto and a resident of the Fraser Valley. That is the reason a CPA outside Ontario can prepare an Ontario return: the federal legislation is national, and the provincial layer is a defined schedule applied on top of it. What has to be right is the provincial schedule and the credits that belong to it. What does not need to change is who prepares the file. See Ontario tax facts and salary versus dividends.

Getting the sequence right

All of this is decided before the return is prepared. The amount and form of remuneration is set around the corporate year-end, and by filing season the surtax, the premium and the credits are simply consequences. The useful work therefore happens in the autumn for a December year-end, or in whatever month precedes the corporate year-end for anyone else — which is also why having one preparer for both returns matters more in Ontario than in a province with a flatter provincial structure.

What is covered

One Chartered Professional Accountant handles the whole file:

• T1 preparation with the full Ontario provincial schedule
• Surtax and health premium effects modelled before remuneration is set
• Salary and dividend mix reviewed against the provincial structure
• Corporate return prepared on the same file
• Instalment review and CRA correspondence

Remote, and there is no Toronto office

EverStone operates from one office, in Abbotsford, British Columbia, and has no Toronto location. Engagements run entirely online — video meetings, e-signature and secure document upload — and personal income tax is federal legislation with a provincial schedule on top, so preparation is not tied to a local address.