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Last edited by flexgrip on Sep 22nd, 2020 9:08 am, edited 1 time in total.
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Sr. Member
Aug 13, 2003
503 posts
342 upvotes
Calgary
There are others out there in the same boat with the exact same situation. Question though, other than saving on the CPP contributions, why would you take dividends only instead of T4 employment income? As I understand it, due to integration, there is no benefit overall tax-wise to taking dividends only. Plus you do not build up any RRSP contribution room with dividends only.
Member
Apr 2, 2020
205 posts
89 upvotes
flexgrip wrote: Wife has a small business that is impacted by COVID-19, revenues down by over 50%. Unfortunately she took out dividends rather than a salary last year.

None of the programs offered by the government appear to cover this situation. Seems ridiculous that if she paid herself a salary she would be eligible for CERB ($2,000/month) and CEBA ($40K loan with $10K forgiveness) but because it is a dividend, it is $0.

Any others impacted like this?
So far my business doesn't qualify for any of the programs either. The government will have to do more.
Deal Addict
Dec 13, 2007
2026 posts
536 upvotes
Toronto
Technically you have until Apr 15 to report your March payroll to CRA. Your wife theoretically can still pay herself salary for March. The requirement for CEWS is that employee is on payroll as of Mar 15. But of course if she does not have a payroll account, then even that is not an option.
Deal Addict
Sep 19, 2009
2123 posts
901 upvotes
Toronto
slavka012 wrote: Technically you have until Apr 15 to report your March payroll to CRA. Your wife theoretically can still pay herself salary for March. The requirement for CEWS is that employee is on payroll as of Mar 15. But of course if she does not have a payroll account, then even that is not an option.
Very true. Work done in second half of Feb, paid on Mar 1st, payroll remittance due on Apr 15. This is what actually accountants are recommending these days. Just to add that CRA does not receive individual taxpayer payroll information, only a summary of the remittance at business level, and this can also help you to make your case.

And a payroll number account can easily be created online, if you don't have one.
Deal Fanatic
Oct 7, 2007
9046 posts
4883 upvotes
slavka012 wrote: Technically you have until Apr 15 to report your March payroll to CRA. Your wife theoretically can still pay herself salary for March. The requirement for CEWS is that employee is on payroll as of Mar 15. But of course if she does not have a payroll account, then even that is not an option.
I see what you are saying but isn't this a bit risky should the CRA audit you? It seems that the government tried to scare us by saying people who try to "take advantage" or "game the system" would be met with severe consequences. Would this be considered gaming the system?
Deal Expert
May 30, 2005
47119 posts
7520 upvotes
Richmond Hill
DentDude wrote: There are others out there in the same boat with the exact same situation. Question though, other than saving on the CPP contributions, why would you take dividends only instead of T4 employment income? As I understand it, due to integration, there is no benefit overall tax-wise to taking dividends only. Plus you do not build up any RRSP contribution room with dividends only.
Aren't dividends taxed at 15% instead of your marginal tax rate? That is a lot lower than what it could otherwise be.
Sr. Member
Aug 13, 2003
503 posts
342 upvotes
Calgary
Jon Lai wrote: Aren't dividends taxed at 15% instead of your marginal tax rate? That is a lot lower than what it could otherwise be.
Dividends are paid out from after tax corporation income so the corporation has paid their tax on it. When paid out to the shareholder the shareholder will pay a reduced personal amount of tax on the dividend as dividends are taxed less. If you add up the tax that the corporation paid plus the personal tax that the shareholder paid, it works out to the same amount of total tax paid that would have been paid by the shareholder alone if they received that money completely as T4 salary income. That is known as the principle of integration which our tax system is based on.
Deal Addict
Dec 13, 2007
2026 posts
536 upvotes
Toronto
choclover wrote: I see what you are saying but isn't this a bit risky should the CRA audit you? It seems that the government tried to scare us by saying people who try to "take advantage" or "game the system" would be met with severe consequences. Would this be considered gaming the system?
Valid question, I don't know. I've been paying myself salary for years, but I did not pay in Jan and Feb because I got another full time job. I will def pay myself again in March. I honestly think that is above board. My wife is helping me with books, but since she is on EI (mat leave) I did not put her on payroll. Now I'm considering get her off the EI parental benefit and put her on payroll asap. Is that gaming the system? I'd like to know.

It is amazing how poorly the new system is formulated.
Deal Addict
Sep 19, 2009
2123 posts
901 upvotes
Toronto
slavka012 wrote: Valid question, I don't know. I've been paying myself salary for years, but I did not pay in Jan and Feb because I got another full time job. I will def pay myself again in March. I honestly think that is above board. My wife is helping me with books, but since she is on EI (mat leave) I did not put her on payroll. Now I'm considering get her off the EI parental benefit and put her on payroll asap. Is that gaming the system? I'd like to know.

It is amazing how poorly the new system is formulated.
I am sure that in CERB context, your actions are not considered "gaming the system". I know accountants recommending this. On the other hand, it was already officially mentioned that the 75% wage subsidy will come with rules to prevent non-arm's length dealings.
Deal Addict
Dec 13, 2007
2026 posts
536 upvotes
Toronto
andrew4321 wrote: I am sure that in CERB context, your actions are not considered "gaming the system". I know accountants recommending this. On the other hand, it was already officially mentioned that the 75% wage subsidy will come with rules to prevent non-arm's length dealings.
That's a thing, so far the only rule I see is
A special rule will apply to employees that do not deal at arm’s length with the employer. The subsidy amount for such employees will be limited to the eligible remuneration paid in any pay period between March 15 and June 6, 2020, up to a maximum benefit of $847 per week or 75 per cent of the employee’s pre-crisis weekly remuneration.

I don't really understand what that means. "Pre-crisis renumeration" in particular.
Sr. Member
Aug 13, 2003
503 posts
342 upvotes
Calgary
slavka012 wrote: That's a thing, so far the only rule I see is

I don't really understand what that means. "Pre-crisis renumeration" in particular.
Pre-crisis remuneration is what you were earning before March 15, 2020 so if you were earning less than $1129.33 per week then you can only get 75% of the lesser number. You can't arbitrarily give yourself a raise to $1129.33 to make the 75% equal to $847 per week.
Deal Addict
Dec 13, 2007
2026 posts
536 upvotes
Toronto
DentDude wrote: Pre-crisis remuneration is what you were earning before March 15, 2020 so if you were earning less than $1129.33 per week then you can only get 75% of the lesser number. You can't arbitrarily give yourself a raise to $1129.33 to make the 75% equal to $847 per week.
Even if that was started on March, 1st? If it is, then it is not much of a restriction.
Newbie
Oct 20, 2012
87 posts
43 upvotes
Vancouver, BC
I'm in the same boat. 2 owners and 1 employee at our business, both owners paid through dividends since we started up last year. Even if we put ourselves on payroll effective March 1 we wouldn't meet the $50,000 min payroll to be eligible, our employee only came on recently.

Revenue dropped 85% instantly, but since we were barely operating this time last year we're not down 30%, so no help with the $40,000 loan.

Thinking I'll make a $5,000 payment to each of us dated March 1 (and remit payroll deductions) so at least we're eligible for the CERB going forward. Thoughts?
Deal Addict
Sep 19, 2009
2123 posts
901 upvotes
Toronto
eggsbenedict wrote: Thinking I'll make a $5,000 payment to each of us dated March 1 (and remit payroll deductions) so at least we're eligible for the CERB going forward. Thoughts?
It should work.
Deal Addict
Sep 19, 2009
2123 posts
901 upvotes
Toronto
The question regarding getting dividends instead of salary for incorporated individuals or small businesses, was asked many times here. Finally some good news.

https://www.canada.ca/en/services/benef ... tions.html
If I am in receipt of dividends am I eligible for the Canada Emergency Response Benefit?
Yes, as long as the dividends are non-eligible dividends (generally, those paid out of corporate income taxed at the small business rate).

An individual could count this income towards the $5,000 income requirement to be eligible for CERB.
Sr. Member
Aug 13, 2003
503 posts
342 upvotes
Calgary
flexgrip wrote: Wife has a small business that is impacted by COVID-19, revenues down by over 50%. Unfortunately she took out dividends rather than a salary last year.

None of the programs offered by the government appear to cover this situation. Seems ridiculous that if she paid herself a salary she would be eligible for CERB ($2,000/month) and CEBA ($40K loan with $10K forgiveness) but because it is a dividend, it is $0.

Any others impacted like this?
Dividends now are counted in the $5000 eligibility requirement for CERB. See the last question and answer that was just added to this site: https://www.canada.ca/en/services/benef ... tions.html

^^ Edit: whoops andrew4321, you beat me to it.
Deal Addict
Sep 19, 2009
2123 posts
901 upvotes
Toronto
DentDude wrote: Dividends now are counted in the $5000 eligibility requirement for CERB. See the last question and answer that was just added to this site: https://www.canada.ca/en/services/benef ... tions.html

^^ Edit: whoops andrew4321, you beat me to it.
No problem. We can share the credit :)
Member
User avatar
Jan 27, 2006
300 posts
272 upvotes
Anyone have any idea whether taking this $40k business loan will impact or show up on a personal credit report?
Deal Fanatic
Aug 21, 2007
5811 posts
694 upvotes
Markham
dealaddict1231 wrote: Anyone have any idea whether taking this $40k business loan will impact or show up on a personal credit report?
Would assume not.

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