# Incorporated Contractor, taxes, taxes, taxes...



## @Class (Jan 10, 2012)

Hi,

I am an incorporated contractor of a numbered Ontario Corporation who is under contract to two employers at the same time.

Last years gross corporate income was $94,000 with $12,220 in HST.

I am new to doing corporate and personal income tax in this manner. If I paid myself $60,000 in income, how do I pay the tax?

I know the corporation has to hold back the CPP, but what about income tax. Does the corporation pay this as well when taxes are due on April 1st?


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## Plugging Along (Jan 3, 2011)

I assume you income is salary. If it is, then with 14 days after the end for the month which you paid yourself, your corporation needs to remit the cpp and taxes.M this is done every more you take a salary.

I do believe there is a penalty if you are late.


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## Charlie (May 20, 2011)

get thee to an accountant pronto.

there`ll be fiscal year ends to set, personal and corporate taxes to do. Your corporation`s T4s or T5s for dividends or payroll are due at the end of February, so don`t waste any time. Big penalties for filing these late.

this is fairly basic stuff, but with too many considerations for an open forum discussion. All sorts of options regarding dividends, salaries, temp loans to shareholder etc. Some will depend on how you`ve done what you`ve done so far, and some on your personal situation or preferences. A decent `ballpark` for consulting type income in that range is approx 20% tax on the gross. But you should go through it with someone who does this stuff and can give you their attention.


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## FrugalTrader (Oct 13, 2008)

I'll second that, you do NOT want to be late filing T4 and T5s.


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## OptsyEagle (Nov 29, 2009)

CRA has a pretty good website to help you deal with your payroll, CPP, EI and withholding taxes. How much and where to send it, is all there.

http://www.cra-arc.gc.ca/payroll

If it is just for yourself, there should be no EI.


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## uptoolate (Oct 9, 2011)

Definitely a third on Charlie's points and FT's second of them! CRA does not hesitate to teach rather expensive lessons. Makes having a good accountant well worth the cost both in terms of dollars and worry.


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## @Class (Jan 10, 2012)

Plugging Along said:


> I assume you income is salary. If it is, then with 14 days after the end for the month which you paid yourself, your corporation needs to remit the cpp and taxes.M this is done every more you take a salary.
> 
> I do believe there is a penalty if you are late.


Thanks for the reply. So I am definitely late, by a year. I did not know I need to remit CPP and Income Tax every single month, within 14 days of paying myself.

Although I would love to get an accountant, I feel the need to learn how to complete my taxes on my own.


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## @Class (Jan 10, 2012)

@ OptsyEagle - I knew I did not need to remit EI but thank you for the confirmation.

@ Charlie - I thought the due date was April 1st?


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## Homerhomer (Oct 18, 2010)

@Class said:


> Although I would love to get an accountant, I feel the need to learn how to complete my taxes on my own.


Big mistake, given how little you know, how do you even attampt to file your corporate taxes?

Get an accountant ASAP to fix all the mess you have, then learn.


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## MrMatt (Dec 21, 2011)

@Class said:


> Although I would love to get an accountant, I feel the need to learn how to complete my taxes on my own.


Do them with the accountant and learn. Ask questions.

The accountant is for a few reasons.
1. So things are done right. There are certain gotchas for small business that you want to watch out for.
2. He can probably do it faster than you.
3. He can suggest arrangements that improve your after tax income.


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## uptoolate (Oct 9, 2011)

@Class said:


> @ Charlie - I thought the due date was April 1st?


Definitely get an accountant! Please. Especially now that you are behind on filing. The corporation needs to pay CPP monthly until the yearly max is reached, corporate tax monthly and submit withholding on any personal income paid to employees monthly.

Year end for personal tax is likely different than your corporation unless you happened to set them for the same time.


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## FrugalTrader (Oct 13, 2008)

For corporate taxes, I highly recommend an accountant.


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## uptoolate (Oct 9, 2011)

MrMatt said:


> Do them with the accountant and learn. Ask questions.
> 
> The accountant is for a few reasons.
> 1. So things are done right. There are certain gotchas for small business that you want to watch out for.
> ...


These are all very good points! Your accountant can give you enough tips to pay for their expertise. There may be many things that you could pay with corporate money that you are currently paying with after tax personal income. As well, it is important to have books that are very well done in the event that the CRA decides to look at them. They also help you decide how the business is doing as you look back at them and find areas to improve profit.


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## Russ (Mar 15, 2010)

I agree with all the previous advice given. The only reason I can see to do it yourself is if you have time to dedicate to your business that you can't figure out how to sell for your usual hourly rate.

Even if you can figure out how to avoid penalties and how to do effective tax planning, it will take a lot of hours and the savings will be minimal. I believe you will be way better off paying an accountant. Sell those extra hours you have to a customer, doing what you know best for a profitable fee. Then you will have cash left over after paying your accountant's tax-deductible fee.


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