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  • Aug 29th, 2014 6:51 pm
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[OP]
Member
Nov 23, 2001
415 posts
26 upvotes

How to pay spouse

I had a quick question for you guys. My wife is staying home after the birth of our child. I was thinking that she could take care of some administrative stuff for my company in exchange for a "symbolic" 500 dollars monthly. i wanna avoid the payroll altogether. Doable?
21 replies
Deal Addict
Feb 5, 2009
2691 posts
804 upvotes
Newmarket
zipcode wrote:
Jul 6th, 2014 1:12 pm
To use his Wife's tax allowance.
based on what op said the wife is most likely on EI, and furthermore op gave so little info that it would be difficult to suggest anything since we don't even know if he is incorporated, or if she is a shareholder. Obviously the wife can't get any wages or any active income because it will reduce her EI.
[OP]
Member
Nov 23, 2001
415 posts
26 upvotes
Homerhomer wrote:
Jul 6th, 2014 1:23 pm
based on what op said the wife is most likely on EI, and furthermore op gave so little info that it would be difficult to suggest anything since we don't even know if he is incorporated, or if she is a shareholder. Obviously the wife can't get any wages or any active income because it will reduce her EI.
Wife was on EI but we decided to extend her maternity leave for another six months without pay. Company is incorporated and she is not one of the shareholders. Since I needed some basic administrative stuff to be done for the company, I thought she could do it.
[OP]
Member
Nov 23, 2001
415 posts
26 upvotes
Forgot to ask if that's enough info.
Deal Addict
Jul 4, 2004
4402 posts
634 upvotes
Ottawa
Having your spouse do accounting / paperwork / HST returns / etc is a common way of doing income splitting. You just have to be reasonable about the amount (e.g. I think $10k-$20k / year will probably pass easily, more might raise suspicion.
Deal Addict
Feb 5, 2009
2691 posts
804 upvotes
Newmarket
Yes, you could pay her but is it really going to make sense for you?
The best and most proper option would be to put her on the payroll, however you could expense her as bookkeeper expense and such and she can claim it as business income on her personal tax return. If she only makes $3500 per year then there will be no CPP, if she makes more than that you will pay 9.9% CPP up to $52,500. It is really a matter of crunching the numbers for your particular situation. The tax savings on the corporate end, may or may not make sense since you have to pay both sides of CPP, and usually you notice the savings when the amounts to split are significant (assuming it is reasonable).
[OP]
Member
Nov 23, 2001
415 posts
26 upvotes
Homerhomer wrote:
Jul 7th, 2014 8:35 am
Yes, you could pay her but is it really going to make sense for you?
The best and most proper option would be to put her on the payroll, however you could expense her as bookkeeper expense and such and she can claim it as business income on her personal tax return. If she only makes $3500 per year then there will be no CPP, if she makes more than that you will pay 9.9% CPP up to $52,500. It is really a matter of crunching the numbers for your particular situation. The tax savings on the corporate end, may or may not make sense since you have to pay both sides of CPP, and usually you notice the savings when the amounts to split are significant (assuming it is reasonable).
Homer, it has less to do with the saving and more to do with the hassle of doing a payroll. That's why I thought of paying her as if she was an independent contractor who would bill me for work done.
[OP]
Member
Nov 23, 2001
415 posts
26 upvotes
michelb wrote:
Jul 7th, 2014 7:27 am
Having your spouse do accounting / paperwork / HST returns / etc is a common way of doing income splitting. You just have to be reasonable about the amount (e.g. I think $10k-$20k / year will probably pass easily, more might raise suspicion.
Thx Michel. We probably won't go beyond 3500 dollars for this year.
Deal Fanatic
Aug 29, 2006
7456 posts
1383 upvotes
Wouldn't it make more sense to pay her as a shareholders with dividends ??
The Devil made me buy it - RFD. :twisted:
Deal Addict
Feb 5, 2010
2764 posts
175 upvotes
Homerhomer wrote:
Jul 7th, 2014 8:35 am
Yes, you could pay her but is it really going to make sense for you?
The best and most proper option would be to put her on the payroll, however you could expense her as bookkeeper expense and such and she can claim it as business income on her personal tax return. If she only makes $3500 per year then there will be no CPP, if she makes more than that you will pay 9.9% CPP up to $52,500. It is really a matter of crunching the numbers for your particular situation. The tax savings on the corporate end, may or may not make sense since you have to pay both sides of CPP, and usually you notice the savings when the amounts to split are significant (assuming it is reasonable).
If the OP were to go expensing her as a bookkeeper and having her claim it as business income on her personal income return route, are there any conditions to be met aside from being reasonable (I assume that this route is better since you wouldn't deduct cpp/ei like you would with payroll)?
Deal Addict
Feb 5, 2009
2691 posts
804 upvotes
Newmarket
Abel4Life wrote:
Jul 7th, 2014 7:41 pm
If the OP were to go expensing her as a bookkeeper and having her claim it as business income on her personal income return route, are there any conditions to be met aside from being reasonable (I assume that this route is better since you wouldn't deduct cpp/ei like you would with payroll)?
I sometimes wonder why people are so oppose to payroll ;-) If you have only spouse on the payroll you are quite likely to qualify for quarterly remittance, if the payroll is the same each month you do the calculations once, do the payroll remittance each quarter, and prepare T4 at the end of the year, and the most important is you have CRA of your back.

CPP and EI factors are not relevant, you wouldn't deduct EI from the relative, and CPP is either deducted from the payroll or on the individual's tax return if reported as business income, it would only make a difference if the spouse has other income subject to CPP and already the CPP deduction is maxed out, than having subcontractor is cheaper than employee (I am only talking about hiring a spouse/relative, where you don't have to worry about vacation pay and other payroll related expenses).

If a spouse is self employed than unless the sales exceed 30k you don't need to do anything, once you exceed 30k in four consecutive quarters gst registration is required. One issue is that CRA may consider the individual to be an employee and not sub contractor (there are many conditions to be looked after, does the person have only one client, does the person advertise like any normal business would and on and on and on).

In the case of the corporation I suggest proper corporate structure which may include non voting shares issued to relatives (usually spouse, sometimes children) if the situation allows it and is beneficial, this opens another possibility of taking the funds out of the corporation and possible tax savings, secondly I suggest payroll due to the factors mentioned above and at times paying for some services, however this doesn't go without the risk of being reassessed by CRA.
Newbie
Nov 18, 2010
9 posts
BC
You can declare your wife's personal deduction on your own taxes so it wouldn't give you any savings to pay your wife only $3500. Are there advantages to paying the spouse the $3500 instead of just deducting it from his own tax return?

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