Procom contractor night

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Procom – Contractor EducationAdvantages of Incorporation

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AGENDA

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Good Advice is Priceless

Get a good accountant• That educates you• That asks questions• That you understand• That works with small business

Ask for a referral

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Who We Are

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What We Do

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Why We Do It

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Why Contractors Choose Us?

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Three Primary Forms of Organization

PROP. PARTNER CORP.

Cost to set up Low Low ModerateExpense deductibility Yes Yes YesSeparate Legal Entity? No No YesSeparate Tax Return? No No Yes (2)Financial Statements? No No YesFiscal Year End? Dec 31st Dec 31st Any DateSheltered Liability? No No Yes (*)CPP / Employ. Ins. Both CPP CPPTax Deferral? No No YesDividends No No Yes

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Sole Proprietorship

Pros

Cons

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Partnership

Pros

Cons

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Incorporation

Pros

Cons

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Financial Advantages of Incorporation

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Non-Financial Advantages of Inc.

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Financial Comparison

Sole Proprietor Corporation

40K 43K30K

ContractorEffective tax rate = 14.5 %

=$6,224.

SpouseEffective tax rate = 12%

=$3,612

Corporate Tax:

37K at 15.5%

=$5,735

Total Personal Tax: $21,702Total Corporate

& Personal Tax: $15,571

37K

150K

40K 80K30K

150K

SpouseEffective tax rate = 12%

3612.81

ContractorEffective tax rate = 22.6 %

= $18,090

Expenses Expenses

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Maximizing the Benefits of a Corp

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Decreased ExpensesIncreased Taxes.

Lack of knowledge.

Fear of Revenue Canada.

Poor record keeping.

Don’t Leave Money on the Table

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Maximizing Expenses

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Tools for Maximizing Expenses

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Advertising Vs. Business Promotion

50% of the total spent on meals and entertainment

Rather have customer social events – they’re fully deductible

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You can apply losses made in a business against other income earned

20

When going out for business lunches, dinners, breakfasts write the clients name on the credit card slip

Keep a diary so you don’t have to remember what the expense was related

to

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Advertising Expenses

You can give your employees 2 non-cash gifts per year, tax free for special occasions such as Christmas, Hanukkah, birthdays, marriages etc.

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Motor Vehicle Expenses

• Automobile expenses can be calculated using actual expenses or a mileage rate.

• Automobiles should be purchased/leased under your personal name and the business can reimburse you for its use of the vehicle.

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Home Office Expenses

In order to calculate the amount you can deduct from your tax return you will need to determine the business % of use

•Rent or Mortgage interest •Insurance •Utilities•Property taxes•Maintenance fees

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Books & Periodicals

• Newspapers • Magazines• Subscriptions• Anything you read!

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Education & Seminars

If you can deduct an expense

on your personal tax return it is better to claim it personally and exclude it from your corporate tax return

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Telephone and Internet

• Cell Phone• Internet• Long distance• Secondary lines• You cannot deduct your

primary home telephone line

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Insurance

3 Types from a tax perspective Health, Dental E & O Disability Life

Premiums are deductible as an expense if:

You are incorporated and it’s your primary source of income

You offer coverage to all your permanent full time employeesGet expert advice

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Capital Cost Allowance(CCA)

• You’re allowed you to claim CCA on all business assets

• Ask your accountant what the rates are as they change regularly

• Assets that cost less than $200 can be expensed

• Ensure that you keep an accurate list of all the assets

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Large Assets

When making a large asset purchase consult with your accountant.Timing is important

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Split Income to Save Taxes

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Tax avoidance/planning is legal – using legitimate ways to reduce tax

Incorporating to save taxesIncome tax splitting

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Evasion of tax is breaking the law, falsifying accounting or not declaring income

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Savings $5,391

1 person earns $100,000

Tax Payable = $32,825

2 people earn $50,000 each

Tax Payable = $13767 each

Total Payable = $27,434

Income Splitting

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Accessing Money Left in Your Corp

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What is Personal Service Business (PSB)

Subsection 125(7) of the Income Tax Act offers this definition of "personal services business":

"Personal services business" carried on by a Corporation in a taxation year means a business of providing services where a) an individual who performs services on behalf of the Corporation (in this definition and paragraph 18(1) (p) referred to as an incorporated employee), or b) any person related to the incorporated employee is a specified shareholder of the Corporation and the incorporated employee would reasonably be regarded as an officer or employee of the person or partnership to whom or to which the services were provided but for the existence of the corporation. (Emphasis added.)

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Background of Legislation

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PSB Considerations

Act like a business & be treated like one! Contractor conduct

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Current Situation – CRA PSB Project

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CA4IT PSB Protection

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Next Steps

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Exclusive Offer for Procom Candidates

Our Paralegal Services Include: Our Fee:

• Articles of Incorporation for government approval• HST/Business Number Registration• Initial Return / Form 1• Corporate Bylaws• Preparing:

• Minutes of the organizational director’s meetings*• Minutes of 1st shareholders’ meeting*• Subscription for shares*• The officer and directors’ registers*• Share certificates*

$495.00 (Plus HST)

Other Services Included:Government Filing Fee Included

Name Search Fee Included

Corporate Minute Book & Corporate Seal Included

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Exclusive Offer for Procom Candidates

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Our firm has been dealing with incorporated professionals like you since 1984, no one knows this business better than

us…and we are assertive in our tax policies… we are very good at what we do and we have

served 1000’s of clients!

Phone: 1-800-465-7532 Email: CustomerService@CA4IT.com

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