If you are an incorporated professional in Victoria or an incorporated businessperson have you considered your year end tax planning with your tax advisor?
Things to be considering include:
- optimize your dividend/salary mix from your company – consider your cash requirements, the tax position of yourself and your family personally as well as corporate income for the year
- accrue a bonus – if in a high corporate income situation it may be appropriate to accrue a bonus for yourself to ensure maximum RRSP room for 2011. Salary must be at least $125,000 for 2010 to achieve maximum RRSP contribution room for the following year.
- see my other blog regarding foregoing RRSP contributions in favour of dividends and investing inside your company, a holding company or family trust http://www.gustafsonaccounting.ca/blog/uncategorized/tax-planning-for-professionals-is-an-rrsp-necessary – this may be an appropriate strategy for you
- Pay eligible dividends if you have an available GRIP balance in your company – Eligible dividend tax rates are going up in British Columbia in 2011 by 2.4%! That means now is the time to clear your GRIP balance by declaring the appropriate amount of dividends for the year. If you have accumulated a GRIP balance through high tax income in your company or from portfolio investments you should be ensuring that you issue enough dividends and report them appropriately to qualify as eligible dividends. Consult your tax advisor.
- Pay your family – Yes, you can pay your family members a reasonable wage for services performed, including minor children or your spouse. This is a great way to reduce higher rate marginal income. CRA will support positions that are reasonable where services are actually being performed by family members such as bookkeeping assistance, administrative duties etc..
There are many other year end issues to consider, some of which need to be addressed before year end, and some that should be considered in preparing your December 31, 2010 professional year end – make sure you are considering them to optimize your 2010 and 2011 tax positions.