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Taxes Information |
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Reducing Taxes Through Dividend-Salary Mix Calculations
Should I take wages or dividends from my privately ownedcorporation? What is the best way of taking money out of my company? In other words, what will result in theleast amount of income taxes? A Canadian accountant will perform a dividend-salary mix calculation to determine the best way of withdrawing money from the corporation. Even though Canadian income tax laws are different from other jurisdictions, some of the same principles of tax planning will still apply. In order to qualify for Canada Pension Plan (C.P.P.) benefits or to make Registered Retirement Savings Plan (R.R.S.P.) contributions, there must be some earned income. This requires the payment of wages. In fact, many accountants will make sure that their clients have maximized their C.P.P. and R.R.S.P. contributions for the year in order to ensure sufficient future retirement benefits, even if it costs a little more in income tax and/or payroll taxes. On the other hand, the Dividend Tax Credit reduces the tax payable on dividends received from the corporation, since the corporation has already been taxed on its income. Therefore, the accountant may recommend that the corporation pay some dividends. Sometimes, if the owner doesn't require the cash, the income is simply retained inside the corporation and tax is paid at the lower small business rate by the corporation. If the corporation had income in excess of the Small Business Deduction, it likely would pay it out in wages. Depending on the circumstances of the taxpayer, wages may be the least expensive way of taking money out of the corporation. Sometimes, dividends are better. Generally, a mix of both is required. An accountant will have to balance many factors to come out with the optimal mix for you. He will consider your family situation, other income sources, losses, investment and retirement objectives, et cetera. Keep in mind that the lowest possible tax bill for the current year is not always in your best interests. RESOURCE BOX: J. Stephen Pope, President of Pope Consulting Inc., http://www.popeconsultinginc.com/ has been helping clients to earn maximum business profits for over twenty-five years. For valuable Work at Home Small Business Ideas, visit: http://www.yenommarketinginc.com/ For more information about income taxes, visithttp://www.yenommarketinginc.com/income-taxes.html
MORE RESOURCES: Benefits paid to suffering unemployed workers will have to be cut and taxes on struggling businesses will have to go up to pay for a staggering number of claims due to the recession, Wisconsin lawmakers were told Wednesday. The debate over school taxes in Hastings-on-Hudson has revealed the cultural and economic fault lines in the Westchester County river town. MANILA, Philippines - The country's next president will have to turn his back on populist promises made during the campaign and raise taxes sooner rather than later to prevent a financial crisis soon after the May elections. Waukee residents will pay slightly higher property taxes to the city under a budget that will take effect on July 1, though the city’s levy rate will not change from recent years. MANILA (Reuters) - The Philippines' next president will have to turn his back on populist promises made during the campaign and raise taxes sooner rather than later to prevent a financial crisis soon after the May elections. Moore County has advertised tax liens against Little River Golf Club and other properties of the resort for failing to pay about $220,000 in property taxes. A small jump in the tax levy, combined with a larger drop in property valuations, should result in a drop in taxes for most Bayport property owners. If President Obama's proposal to apply a Medicare levy to investment income had been in place in 2008, the Obamas would have paid roughly $75,000 more in taxes that year. Faced with failing to make annual $1 million payments promised to the owners of Reno's Triple-A baseball team, city officials propose to use sales taxes generated by a planned retail development near the stadium to cover the debt. With April 15 right around the corner, accountancy department chair Keith Smith has words of wisdom for students filing taxes. |
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