VANCOUVER, BC--(Marketwired - January 05, 2017) - The Vancouver accountants at Mew + Company understand December is a challenging time for everyone. As the end of the calendar year, corporate shareholders have different lists they need to check twice, as this is often the final opportunity to get fiscal affairs in order. To help, Mew + Company has released the 2016 Checklist for Corporations & Shareholders at Year End. For more, go to: http://www.mewco.ca/blog/2016-checklist-for-corporations-shareholders-year-end-canada/
Every Canadian has the opportunity to do some year-end tax planning, but corporate shareholders in particular have many tax planning options to consider at year-end, regardless of the fiscal year-end date of the corporation.
1) Update accounting records
This is necessary to determine wages paid and draws made during the year, as well as expected cash balances. More importantly, profitability can be more accurately estimated with complete accounting records. Once this information is available, shareholders and business tax advisors can come up with remuneration methods, remuneration amounts, income splitting strategies, and other tax-driven plans to minimize taxes.
2) Determine if sales tax and income tax installments are sufficient
With up to date accounting records, GST and corporate tax liabilities can also be estimated and remittances made can be compared to CRA records. Companies can easily assess if higher payments will be required or if overpayment has occurred. Basically, shareholder compensation may be impacted by tax funding requirements, and up-to-date accounting records can help develop a clearer picture.
3) Determine income, gains, and losses
This should be done for both corporate and personal portfolios. Investment income earned within the corporation are initially taxed at a high rate and create refundable tax and capital dividend pools. This can impact remuneration decisions and the personal tax of shareholders. Whether it's for corporate or personal portfolios, capital losses cannot be used to offset business profit, employment income, or investment income. However, capital gains are taxed at a 50% inclusion rate in a corporation and the personal account. If capital gains are realized in a corporation, tax planning is a must to extract the capital dividends on a tax free basis. If large gains are realized in a personal portfolio, consider less remuneration from the corporation for the year and buying more RRSPs. An investment advisor can provide additional information.
4) Determine RRSP contributions
Of course, no year-end checklist would be complete without assessing the need to purchase RRSPs. Since RRSPs are a full deduction (as opposed to a tax credit), higher income shareholders greatly benefit from them. Investment income and capital gains earned in an RRSP are sheltered until withdrawals are made. Contributions can be made but don't need to be immediately deducted. Strategically, it's better to wait for a high-income year to deduct RRSP contributions from taxable income.
5) Calculate childcare expenses
Like RRSPs, childcare expenses are a full deduction (up to a certain amount), which benefits higher income taxpayers. The only trick with childcare expenses is that they can only be deducted against employment income by the lower income spouse. Again, shareholder(s) and the spouse have the ability to plan remuneration in order to fully use the childcare expense deduction.
Bring proactive when it comes to tax planning at the end of the year can alleviate future headaches and disappointments. Consult a business tax advisor and engage in a little light planning -- your future self will thank you!
About the Company
Mew + Company, Vancouver, is an ideal solution to the taxation problem. With a simple philosophy of building long-lasting customer relationships, the company has been serving corporate clients in a variety of fields -- including restaurants, real estate, retail, and the service industry. Investing in their specialist services will undoubtedly be fruitful for all kinds of clients.
To learn more about Mew + Company and discuss their services, log on to http://mewco.ca/