Entrepreneurship & Small Business

Paying myself salary only once a year. CRA sent a letter

  • Last Updated:
  • Jul 8th, 2018 10:54 am
[OP]
Deal Addict
Mar 16, 2015
1384 posts
210 upvotes

Paying myself salary only once a year. CRA sent a letter

I have an incorporation ( I am an IT consultant). I do not have much need of money so I only withdraw salary once a year( or twice max)
I know that I have risk of being classified as PSB, what I do is , I withdraw approx 80% to 85% of revenues as Salary in one shot in the last month of my financial year and I pay the tax remmitances to CRA immediately.
Now CRA sent me a letter that thjey reviewed last year's account and they found out that my average monthly withholding amount ( AMWA) is $25000 or more so they think that I might need to remit more frequently in 2019.
They sent a form to fill asking me how frequently I pay to my employees. The options are weekly, bi weekly, monthly, twice a week and Yearly...
What do you suggest I go from here. I just do not take money out every month as I do not need it and I do not want to deal with more frequent remittances etc.. hence one or two times a year is max I am thinking to pay myself( I am only employee)...
Should I just mark the yearly option and they will be satisfied or it might raise a red flag on my corporation. They might think that what kind of company is it that only pays its employees once a month. This might trigger a bigger review and classification as PSB also.
However , if I chose to select Monthly( can take monthly salary if it helps) , they might think why I did not pay every month last year ( although I did not take salary every month but the option does not specify that they are asking this for going forward)
Any suggestions?
3 replies
Deal Addict
Feb 5, 2009
2582 posts
708 upvotes
Newmarket
Since you have remitted annually so far you can't mark higher frequency on the letter, this would trigger a further review. Just mark annually and see what happens, they may or may not investigate further. Payroll once a year is not that uncommon for corps with employed shareholders only, you are not the only one, on the other hand if they change you to more frequent remitter it realy is not that big of a deal, just establish your payroll for the period and remit the same amounts each time. How many minutes it will take you every time?
Member
Jun 25, 2011
322 posts
109 upvotes
Alberta
If you are afraid of the full blown audit then paying yourself dividend would have been a better option.
[OP]
Deal Addict
Mar 16, 2015
1384 posts
210 upvotes
Homerhomer wrote:
Jul 6th, 2018 9:08 am
Since you have remitted annually so far you can't mark higher frequency on the letter, this would trigger a further review. Just mark annually and see what happens, they may or may not investigate further. Payroll once a year is not that uncommon for corps with employed shareholders only, you are not the only one, on the other hand if they change you to more frequent remitter it realy is not that big of a deal, just establish your payroll for the period and remit the same amounts each time. How many minutes it will take you every time?
Thanks for inputs.
First of all, found out that this letter is pretty routine cra activity so its not something they did specially to me.
every year cra reviews 2 year befors remittances ( semms like automated process) and calc Average monthly withholding amount AMWA.
strangely they take sum of all remmitances and devide by no of remittances. I found on some other chamber journals that this calc is screwed up and should be revised. they should just devide by 12 to calc AWMA
so you see in my case they took the amount and devided by 1 hence ofcourse >25k.
now when I had opened the account I had mentioned monthly payroll ( there was no less frequent option) . ideally I take twice a year salary. once in dec and once in july. but as there was no such option I chose monthly.
now I see in Cra my business online account, there is an option to file Nil remittance. I wanted to do that every month that I did not pay myself ( just take few minutes) but my accountant was very casual on it and said don’t bother.
you see that if I had done that my AWMA would have been lower.
now your point is also good that I can mention yearly but I am thinking to again put monthly on the letter( actually I cal also reply to the notice online). by chosing monthly, they can’t put me in accelerated threshold because accelerated threshhold is about remitting twice a month .
then next year I can start filing those nil remittances every month when I don’t pay myself.

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