# Best time to withdraw cash from corporation



## russell55 (Jan 26, 2016)

Hi.

In short i have an incorporated small trucking type business.

I draw a salary each month for me and my wife from the corporate account

Currenlty its $6500 a month

My year end is Aug and then will be my 2nd year.

I do have an accountant but i would like to know from other soruces and for myself how much and how i should be taxed.

Also in addition to the planned salary i have taken a one time withdraw of $9000.

Any info would be great

Thanks


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## Jimmy (May 19, 2017)

Hi,

So $6500 or $78,000 / yr. Will just give you the basic tax deduction of $11,809. This is the combined tax for ON.

Income - $78,000
Deduction 11,809
------------------
Taxable Inc $66,191

Tax at 29.65% on (66,191- 46,605) = $5,807
Tax at 24.15% on (46,605 - 42,960 )= 880
Tax at 20.05% on 42,960 = $8,613
-------
Total $15,298 

You could reduce this too if you buy an RRSP If you made the same in 2017 say, you could put 18% of TI in and greatly reduce the tax.

https://www.taxtips.ca/taxrates/on.htm


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## gardner (Feb 13, 2014)

russell55 said:


> I draw a salary each month for me and my wife from the corporate account


The CRA is getting sticky about "income sprinkling" so you might want too ensure you have paperwork that substantiates that both of you contribute to the business. They won't like you taking a portion of the income even though your wife does all the work, just to keep the tax bill lower. But your accountant knows that.



> i have taken a one time withdraw of $9000.


As a dividend or as income? Since you're over the maximum yearly contribution to CPP, maybe it doesn't make too much difference.

As for timing, I don't know why it would make a difference. Maybe late in the year so that remitted un-owed taxes find their way back to you sooner. This year so as to generate RRSP contribution room sooner, rather than waiting for next year.


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## Koogie (Dec 15, 2014)

You are only in your second year but as time goes by, you might want to speak to your CA and discuss how you want to treat excess earnings. Will you take them out as regular salary to get and fund RRSP contris, as dividends to fund a TFSA or non reg account or do you want to retain them in the company for a rainy day or to invest through the company.

Also, definitely talk to your CA about opening a holding company. It is only a small added cost every year but if you are going to have retained earnings or if your company owns assets (tractors, trailer units, tools etc..) it might be better to have them sheltered in a holding structure. Especially for a trucking company where anything could happen on a given day out there on the roads or with whatever load you happen to be carrying and the liability is tremendous and getting worse every day as we get more litigious as a society.


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## russell55 (Jan 26, 2016)

Thanks for the replays.

So basically because im taking a myslef a salary its just normal provincial/fed tax.

I have been doing the monthly CRA payroll remittance so i belive im safe on that.

Yes my wife does contribute to the business but purhaps not as much as the new cra rules require. Ill have to review that with my accountant.

Thanks for the tip about the holding company. I have already started to leave earning in the corporation and bought a few stocks.
I like the idea of keeping that nest egg somewhat separate. Like in a holding company 🙂

Cheers


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## Jimmy (May 19, 2017)

Another idea which you may already be familiar with too is to use depreciation as best possible from your assets to reduce taxes. If you can, buy equipment toward the end of the tax year. It gets less use and you get the full amount of the 1st years deprecation to reduce your taxes (under the 1st year 1/2 yr rule unfortunately).

For disposals, try and dispose of your assets early in the year. You get the best resale/trade in etc and still get a full years depreciation tax deduction.


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## Eclectic12 (Oct 20, 2010)

russell55 said:


> ... So basically because im taking a myslef a salary its just normal provincial/fed tax.
> I have been doing the monthly CRA payroll remittance so i belive im safe on that ...


Since you mention an accountant, I expect it is covered ... but my understanding is that where one pays oneself a salary from the business, in addition to provincial/federal tax, there is also both the employer plus the employee CPP contributions to pay.

https://www.thebalancesmb.com/salary-or-dividends-how-do-i-pay-myself-2948231


Cheers


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## russell55 (Jan 26, 2016)

I have been paying $2200 each month to the cra.
I was under the impressoon that was to cover, fed/prov tax and cpp for me and my wife.

Given the number above of 15k + 5k for cpp aprox.
I belive im on track. That $9000 one time withdraw wasnt part of my plan the start of the year. 

My accountant hasnt been doing the payroll. I didnt see the point in paying her just to login to the cra website once a month and pay $2200 for me.


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## Koogie (Dec 15, 2014)

russell55 said:


> My accountant hasnt been doing the payroll. I didnt see the point in paying her just to login to the cra website once a month and pay $2200 for me.


+1. Good for you. Payroll is the easiest thing in the world.

If in doubt, doublecheck against the Federales own calculator at:

https://apps.cra-arc.gc.ca/ebci/rhpd/prot/welcome.action?request_locale=en_CA


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## docdosh (Oct 16, 2017)

I have the same question but my situation is a little different.
I pay myself a dividend instead of salary therefore have no RRSP room and can not contribute. (Although I do have some RRSP from when I used to pay myself a salary). I have built up significant savings in the holding company. (I know the new rules allow income from these investments for up to 50K before progressive and punitive taxes apply). 
So this cash in the holding company can be taken out when I am in the lower income bracket and used as an RRSP in my situation when I retire ( maybe in about ten years). Any catch or am I missing anything.


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## Koogie (Dec 15, 2014)

docdosh said:


> I have the same question but my situation is a little different. I pay myself a dividend instead of salary therefore have no RRSP room and can not contribute. (Although I do have some RRSP from when I used to pay myself a salary).


That's a little unclear. Do you just mean you have an RRSP with investments in it or do you have accrued RRSP contribution room that you have not used ? (or both)




docdosh said:


> I have built up significant savings in the holding company. (I know the new rules allow income from these investments for up to 50K before progressive and punitive taxes apply). So this cash in the holding company can be taken out when I am in the lower income bracket and used as an RRSP in my situation when I retire ( maybe in about ten years). Any catch or am I missing anything.


That is the exact same situation I am in. However, I have decided to begin to melt it down sooner by taking slightly larger dividends now. My cynical side says that political economic interference is bad now and only going to get worse as the overspending of today has to be paid for tomorrow. CCPCs with large cash balances are going to be ever more tempting targets. A future version of Morneau will be even more tempted to raid our piggy banks.

What I do is play with the tax calculator at taxtips.ca and figure out each year how much DW and I (she does actual work at the company) can take out in non-eligible divvys and still feel comfortable with the tax level (while figuring in other sources of income such as interest received, flow through of eligible divvys from Holdco to us, etc...)

A little pain now versus more later.


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## russell55 (Jan 26, 2016)

Yes docdosh. I agree. A little tax now and take out an amount that lets you live.

Infact i love any feedback / suggestion On my numbers

Im thinking im going to make around 150k a year. Raw money paid into the corporation.

Now between me and my wife $80000 after tax all clear in our personal account seams to be enought.

I dont care how its split because we share looking after are personal bills food etc.

Also RRSP room at this point is not an issue. My wife has a pretty good pension from her old job and i have lots of unused RRSP room from before i incorporated. (Her too)

As menioned above; im paying $2200 to cra each month. Then
$1500 weekly to our joint personal account


Cheers


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## Jimmy (May 19, 2017)

I think generally you are better to leave your investment $ inside the company. The net tax rate on investments is only 11.5% up to the 1st $1M. 

You will pay a minimum of 20% on your salary in employment income even w an RRSP - you don't avoid tax just defer it.


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## russell55 (Jan 26, 2016)

Yeppers, thats why i am leaving 50k aprox each year in the corp. Or thats that plan.


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## Koogie (Dec 15, 2014)

FWIW, I think you don't want to end up like me with 2/3rds of your net worth stuck in your corporation. Subject to changes in taxation and political whims.

I had a lot of sleepless nights back in the spring worried about what changes they would make to CCPC rules. You guys might have decades ahead of you... lots of things can change in that time. Might be better and safer to liberate more as you go along and have it in your own hands...

Trust me. I hate (*&(&* taxes as much as anyone. I just know they rarely go down and politicians of all stripes rarely stop tinkering with the rules.


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## Jimmy (May 19, 2017)

That is true. Maybe set up a holding company in the Caymans lol


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