• Last Updated:
  • Oct 13th, 2018 8:52 pm
Tags:
[OP]
Newbie
Feb 25, 2014
9 posts

Salary payout - timing?

I’m suspecting some here will say “ask your accountant”, but I’m between accountants at the moment. Working on getting a new one – pardon my ignorance in following (I know there are CPP, EI, payroll tax etc stuff involved here):
I have a small business incorporated in Ontario. I am looking in to payroll companies (e.g., ADP, etc.) to pay myself from the corporation. Fiscal year of the corporation is calendar year. In order for salary paid to me to be deemed as “fiscal/calendar 2018 salary” does it need to be actually paid out to me in 2018 (e.g., direct deposit to my personal bank account on Dec. 15 for example), or can it be paid out to me in 2019 but notated as “2018 salary”?
7 replies
Deal Addict
Feb 5, 2009
2582 posts
708 upvotes
Newmarket
You can accrue salary and expense it in the corporation, and pay out the accrual within 6 months.
What it means is that you can have for example $50K of wages accrued on 12/31/2018 hence reduce your corporate profit by $50K, and pay it out by the end of June 2019, resulting in corporate income deduction in 2018, and personal income (on T4) in 2019.
Newbie
User avatar
Oct 30, 2017
31 posts
8 upvotes
Ottawa, Ontario
jt2014 wrote:
Oct 12th, 2018 9:58 am
I’m suspecting some here will say “ask your accountant”, but I’m between accountants at the moment. Working on getting a new one – pardon my ignorance in following (I know there are CPP, EI, payroll tax etc stuff involved here):
I have a small business incorporated in Ontario. I am looking in to payroll companies (e.g., ADP, etc.) to pay myself from the corporation. Fiscal year of the corporation is calendar year. In order for salary paid to me to be deemed as “fiscal/calendar 2018 salary” does it need to be actually paid out to me in 2018 (e.g., direct deposit to my personal bank account on Dec. 15 for example), or can it be paid out to me in 2019 but notated as “2018 salary”?
hey there,
I am practicing in Ontario, for salary, since you are the major shareholder of the corporation, you can decide to pay yourself anytime you like. as well, you can accrue the salary 6 months ahead if you like for the corporation to expense it. for example, if you like to have a 2018 T4, you can pay now until Dec 31. when you pay yourself, you will need to deduct CPP, tax and remittance to the CRA the 15th the month after. for example, if you decide to pay yourself today, you can either pay yourself cash, cheque or even credit the shareholder account as a loan. then send the CRA payroll remittance during period Nov 1st - 15th for payroll remittance. I do also corporate tax as well, if you are interested, send me a message and we can disucss more in detail. thank you
thank you very much
Philip Kwok, CPA, CGA
Penalty Box
User avatar
Jul 17, 2008
8397 posts
1822 upvotes
I know nothing about businesses but why pay yourself instead of paying yourself dividends? Those are taxed at a favourable rate. Think I heard something like this while lurking in this forum
Sr. Member
User avatar
Feb 14, 2009
990 posts
329 upvotes
jt2014 wrote:
Oct 12th, 2018 9:58 am
I’m suspecting some here will say “ask your accountant”, but I’m between accountants at the moment. Working on getting a new one – pardon my ignorance in following (I know there are CPP, EI, payroll tax etc stuff involved here):
I have a small business incorporated in Ontario. I am looking in to payroll companies (e.g., ADP, etc.) to pay myself from the corporation. Fiscal year of the corporation is calendar year. In order for salary paid to me to be deemed as “fiscal/calendar 2018 salary” does it need to be actually paid out to me in 2018 (e.g., direct deposit to my personal bank account on Dec. 15 for example), or can it be paid out to me in 2019 but notated as “2018 salary”?
1. Actual transfer of funds (check, cash, direct deposit, etc) is not important between
your business account and your personal account.
Money can stay in business side cross finance year. They will be in "liability" account and
will not affect P&L calculations.

2. What important is when your report remuneration and on what category.
For salary the month-year is the same for business and for personal sides.
In case of business finance year is calendar year -- salary is "happening"
as income deduction in, for example, FY 2018 and as personal income in the same FY 2018.

3. Except salary, there is another category: bonus. Any bonus that is reported/issued
withing 6 months after business FY end can be retroactively calculated for previous FY.
For example, bonus is issued 2019 May. It will go to personal T4 from FY 2019.
But on business side, owner may elect to assign this bonus as expenses in FY 2018.
And physically these money can change hands 2019 August! -- nobody cares if
you delay transferring several drachmas to you-self !

Cheers!
Sr. Member
User avatar
Feb 14, 2009
990 posts
329 upvotes
Messerschmitt wrote:
Oct 12th, 2018 7:15 pm
I know nothing about businesses but why pay yourself instead of paying yourself dividends? Those are taxed at a favourable rate. Think I heard something like this while lurking in this forum
1. In very short: the result is approximately the same in mid-range of zeros.

2. in short: Salary is heavily taxed on personal side.
Dividends are averagely taxed in business and in personal side.
there are about 10 different monetary and non-monetary considerations
to elect salary vs. dividends

3. Quick answer: there are several relevant articles high in google search.

4. Simple answer: it depends

5. Ideal answer: take exact amount your business earned. make 6 calculations
for 0,20,40,60,80 and 100% is paid off as dividends/salary.
Analyze the result against you own monetary and non-monetary goals.
Made calculated decision.

6. Lazy answer: ask your finance planner to do #5, pay appropriate fees for work.

7. Cheers!
Sr. Member
User avatar
Feb 14, 2009
990 posts
329 upvotes
double-post erased
Last edited by tequilla on Oct 14th, 2018 9:23 am, edited 2 times in total.

Top

Thread Information

There is currently 1 user viewing this thread. (0 members and 1 guest)