tag:blogger.com,1999:blog-4402283548766807872.post8139067990113896337..comments2024-03-14T19:35:14.456-04:00Comments on The Blunt Bean Counter: Is Your Corporation a Personal Service Business?The Blunt Bean Counterhttp://www.blogger.com/profile/11358868550072516313noreply@blogger.comBlogger166125tag:blogger.com,1999:blog-4402283548766807872.post-77913838624395278392021-01-04T23:00:51.073-05:002021-01-04T23:00:51.073-05:00Unknown, I don't know the case-law off the top...Unknown, I don't know the case-law off the top of my head for this specific situation and it always comes down to the specific facts, so I cannot provide you guidance. My gut is you may have some concern, you should discuss it with your accountant.The Blunt Bean Counterhttps://www.blogger.com/profile/11358868550072516313noreply@blogger.comtag:blogger.com,1999:blog-4402283548766807872.post-33965950918504366682021-01-04T18:41:46.389-05:002021-01-04T18:41:46.389-05:00Hi there,
Curious to know your thoughts on the fol...Hi there,<br />Curious to know your thoughts on the following.<br />What if the services that the sole shareholder of the corporation provides are to a 49% held company of the corporation? This basically means that the shareholder is working for his own business (49% stake). Is there anything in the law/ caselaws that covers this situation?<br />Anonymoushttps://www.blogger.com/profile/06754101415968489562noreply@blogger.comtag:blogger.com,1999:blog-4402283548766807872.post-15888244924333397132020-10-12T16:07:10.249-04:002020-10-12T16:07:10.249-04:00Hi Susan:
I do not provide specific personal tax ...Hi Susan:<br /><br />I do not provide specific personal tax advice to readers. You should speak to your husbands accountant if you do not have your own accountant.<br /><br />They will weigh for you the fact you have several clients which is good, the fact they all are billed to your husbands corp, maybe not so good if you are not an employee of his co. and the fact your income is small, which may diminish the inherent risk of the issue. They can then discuss with you and provide direction <br />The Blunt Bean Counterhttps://www.blogger.com/profile/11358868550072516313noreply@blogger.comtag:blogger.com,1999:blog-4402283548766807872.post-31916603877714324492020-10-09T22:43:38.146-04:002020-10-09T22:43:38.146-04:00Hi, Very confused over this PSB issue and whether...Hi, Very confused over this PSB issue and whether it applies to me or not. I am retired and doing consulting work part time with a few different companies. To help shield any potential legal liabilities I've become an un-paid employee of my husband's corporation. All the income that I invoice for /generate is deposited in my husband's corporate account. As it is not much income, the corporation is not even hitting the HST limits. My husband is the sole shareholder of the corporation. Does the PSB apply at all to this situation? All expenses for my software, etc are paid for by my husband's corporation as if I was an employee. All my work is done at my home and on my schedule except for update meetings with clients, etc.. How do I determine if the PSB applies? Susannoreply@blogger.comtag:blogger.com,1999:blog-4402283548766807872.post-32948314719977767582019-02-11T20:45:43.585-05:002019-02-11T20:45:43.585-05:00Hi T
There are far too many factors to determine ...Hi T<br /><br />There are far too many factors to determine PSB status on a blog and one would have to analyze how and what your subcontractors do for you. I would speak to your accountant or engage one to review your entire corporate tax situationThe Blunt Bean Counterhttps://www.blogger.com/profile/11358868550072516313noreply@blogger.comtag:blogger.com,1999:blog-4402283548766807872.post-47171833418723630052019-02-09T10:44:56.963-05:002019-02-09T10:44:56.963-05:00Hi
I would really appreciate your help.
I am a dat...Hi<br />I would really appreciate your help.<br />I am a data analytics contractor providing services on retainer to a Canaadian customer. I own a corporation and invoice the customer from this entity. I am convinced I am a PSB at the moment but I hope to grow the business beyond my own capacity in the future by making use of subcontractors. I hope to get to 6 people eventually and then I can normalize my business as PSB rules will then fall away. At the moment it is just me in the business. My problem is that according to my understanding of PSB rules only my salary counts as an eligible deduction and not the salaries of any sub-contractors that I hire. This will effectively mean that I cannot hire the subcontractors. How can I grow my business beyond a one man PSB without being able to hire people? Will the CRA allow sub contractor costs to be deducted from my PSB income?TEdwardshttps://www.blogger.com/profile/03507242988539923376noreply@blogger.comtag:blogger.com,1999:blog-4402283548766807872.post-9753843077032874992018-11-06T22:52:10.479-05:002018-11-06T22:52:10.479-05:00A PSB would be subject to reporting on an accrual ...A PSB would be subject to reporting on an accrual basis. T2200 to shareholders have been problematic, I wrote about this previouslyThe Blunt Bean Counterhttps://www.blogger.com/profile/11358868550072516313noreply@blogger.comtag:blogger.com,1999:blog-4402283548766807872.post-78633275180935967442018-11-06T18:07:21.563-05:002018-11-06T18:07:21.563-05:00Anyone with further experience having a PSB compan...Anyone with further experience having a PSB company issue a T2200 to it's main employee to claim office expenses, mileage, etc.? Further, being that the salary deduction allowed are based on amounts actually paid (no bonus accrual), does it stand that income of the PSB corporation is also on a cash basis, or does it still have to report A/R?<br /><br />Thanks FabienFGnoreply@blogger.comtag:blogger.com,1999:blog-4402283548766807872.post-90506438871516253462018-09-23T10:50:53.262-04:002018-09-23T10:50:53.262-04:00Hi T,
This is a very complicated question I will...Hi T, <br /><br />This is a very complicated question I will not answer on my blog. Speak to your accountant or hire one, sorry.The Blunt Bean Counterhttps://www.blogger.com/profile/11358868550072516313noreply@blogger.comtag:blogger.com,1999:blog-4402283548766807872.post-78240096357656264062018-09-21T06:55:33.819-04:002018-09-21T06:55:33.819-04:00Hi
I am a data analyst contracting to a South Afri...Hi<br />I am a data analyst contracting to a South African company. I am set up as a sole proprietor and use an agency to pay all my taxes as a deemed employee in order to avoid PSB pitfalls. Due to exchange rate concerns I am interested in creating a seperate business (this one incorporated) with a proper website etc to find Data Analytics projects in Canada. As it will be a startup having five or more employees would be out of the question. If I pick up work I will likely have to use a subcontractor or employee to deliver as most of my capacity will still be taken up by my primary contracting work with the South African company. The incorporated business will be a proper business and I am worried that the fact that I am already working as a deemed employee with the SA company will cause my incorporated company to also be deemed as a PSB. One scenario I am specifically worried about is where I have one or two people delivering to my incorporated business' clients. I would make a profit on their work but if their salary expenses cannot be deducted then almost all of the business profit will be consumed by double tax. My understanding is that only the owner's salary is a deductable expense in a PSB and I would not be able to use employee salaries as a deduction. How can I create a viable business if I cannot hire less than 5 people without double tax problems? What would you suggest I do to avoid these problems?TEdwardshttps://www.blogger.com/profile/03507242988539923376noreply@blogger.comtag:blogger.com,1999:blog-4402283548766807872.post-7358406922800185992018-01-08T19:35:10.098-05:002018-01-08T19:35:10.098-05:00Hi Mark,
(Thanks for your generous effort here.)
...Hi Mark,<br /><br />(Thanks for your generous effort here.)<br /><br />Could you offer an opinion:<br /><br />Regarding the criterion of 'possibility of loss' for distinguishing PSBs from non-PSBs - if a client requires proof of substantial professional liability/indemnity insurance as a condition of being contracted by them ('in case we, and thereby you, get sued because your work is deficient'), would this be useful do you think in at least helping to make the case for non-PSB?<br />Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-4402283548766807872.post-77405097717203372762017-11-07T21:58:35.969-05:002017-11-07T21:58:35.969-05:00Hi Anon
Yes you have risk for employee tax deduct...Hi Anon<br /><br />Yes you have risk for employee tax deductions and maybe other employment related issues. Speak to your accountant, I dont provide specific tax planning advice on this blogThe Blunt Bean Counterhttps://www.blogger.com/profile/11358868550072516313noreply@blogger.comtag:blogger.com,1999:blog-4402283548766807872.post-29209238653724022002017-11-07T18:38:13.728-05:002017-11-07T18:38:13.728-05:00Our company engaged a couple of consultants throug...Our company engaged a couple of consultants through their corporations and there is no doubt we have an employer/employee relationship. Given that situation, does our company have any CRA/tax risk? Should we be deducting taxes from the payments to the companies? Should we terminate these contracts and hire the individuals as casual employees. Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-4402283548766807872.post-35830386394735236972017-08-04T10:23:34.233-04:002017-08-04T10:23:34.233-04:00Hi RUC
Sorry, I do not provide specific tax plann...Hi RUC<br /><br />Sorry, I do not provide specific tax planning advice on this blog. As you have just started your accounting courses, you would be best to engage an accountant for a consultation on this issue and work through the actual facts. The Blunt Bean Counterhttps://www.blogger.com/profile/11358868550072516313noreply@blogger.comtag:blogger.com,1999:blog-4402283548766807872.post-23829311661441741492017-08-04T09:25:06.622-04:002017-08-04T09:25:06.622-04:00Hi,
Your blog is very informative and is still an...Hi,<br /><br />Your blog is very informative and is still an issue currently.<br /><br />Please advise us for we are just starting:<br /><br />My husband resign from his current employer and make a contract to another company as independent contractor. I incorporated his business hoping that he will have a lower rate, however, I have read about PSB. I am taking CPA right now (2nd module) and decided to take taxation (challenge exam) for I want to know about tax corporation. I will be the one to take care of the accounting transactions of my husband. I am not working right now. I am worried that my husband will be deemed as incorporated employee (PSB). My question is which of the three is better for him: <br /><br />1) to become a sole proprietorship and report his income in personal tax.<br />2) to become a corporation and regard as PSB and get all the income as salary.<br />3) to become a corporation (do not regard as PSB so we can charge all other expenses like fuel, etc.) but get all the income as salary.<br /><br />Also, I also plan to get some bookkeeping fees from the corporation to have some personal income and lessen the net income to the corporation. Which is better: I will be included in the corporation payroll ? or just get a bookkeeping services?<br /><br />Please advise us as soon as possible for my husband will start by the next two weeks from now. I haven't decided yet what is the best option for my husband corporation.<br /><br />Thanking you,<br />RUC<br /><br />Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-4402283548766807872.post-46450910158320705232017-07-27T18:48:09.438-04:002017-07-27T18:48:09.438-04:00ok if you say so. speak to your accountantok if you say so. speak to your accountantThe Blunt Bean Counterhttps://www.blogger.com/profile/11358868550072516313noreply@blogger.comtag:blogger.com,1999:blog-4402283548766807872.post-76621059577604699872017-07-27T17:09:49.803-04:002017-07-27T17:09:49.803-04:00But the way I understand, the interest collected i...But the way I understand, the interest collected is taxed at the non small business rate. As such, the interest can be separated in a notional account ( I think this is their wording) of income that was subject to regular rate. This can be paid out as qualified dividends. ( this is the way I translated in plain English the native CRA language:-)Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-4402283548766807872.post-83946682054348977432017-07-27T15:03:07.338-04:002017-07-27T15:03:07.338-04:00Hi Anon:
Dividends that are classified as eligibl...Hi Anon:<br /><br />Dividends that are classified as eligible dividends (typically public co) can be paid as eligible dividends. Interest cannot be paid as an eligible dividend.The Blunt Bean Counterhttps://www.blogger.com/profile/11358868550072516313noreply@blogger.comtag:blogger.com,1999:blog-4402283548766807872.post-47876841766567063862017-07-27T11:54:13.790-04:002017-07-27T11:54:13.790-04:00Thanks anyway. I understand, everything is wishy w...Thanks anyway. I understand, everything is wishy washy, and that is the way they like it...Another questions: I had some investments in dividend paying stocks, and collected some dividends. I understand that if i give out the same amount of dividends to shareholders they will be considered eligible dividends. Also interest collected from investments could be paid out as eligible dividends, because they are taxed in the corporation at the regular tax rate ( it is not active business income)..Am I correct?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-4402283548766807872.post-78188351499937891032017-07-24T14:25:17.646-04:002017-07-24T14:25:17.646-04:00Hi Anon
I do not provide specific tax advice on t...Hi Anon<br /><br />I do not provide specific tax advice on this blog. All I can say is that if I had to make your case with the CRA, some of those facts are helpful while some are irrelevant and I would not be able to say one way or the other if you would win the contractor vs employee argument. Sorry for the wishy washy answer. The Blunt Bean Counterhttps://www.blogger.com/profile/11358868550072516313noreply@blogger.comtag:blogger.com,1999:blog-4402283548766807872.post-42473488674426470172017-07-21T21:44:08.423-04:002017-07-21T21:44:08.423-04:00Thank you for your amazing insight. I have the sam...Thank you for your amazing insight. I have the same situation as a lot of others: incorporated, sometimes work trough agencies for a third party, sometimes directly,always had some smaller customers too. would some of the following help if audited:<br />-I always invoice, and charge HST<br />-I never paid dividends<br />-I pay out about 60% of the income as salary, I tried to have some capital as I work on several ideas for the future.<br />-I got pretty stuck with on customer, were I also do on call support on top of project work. If I do not get called on weekends, I do not get paid. Sometimes I get calls during the night and I charge for it...Hours are irregular but I do work 30-50 hours a week...The contract I have allows cancellation by client with no notice, but I do have to give 3 weeks notice if I no longer want to work for them ( or make a mistake if I want them to stop:-) Although I do invoice per hour, but I had do tasks that took me much longer then what I could charge. most of the work is done for a a client of the client of the agency, so I am 3 degrees from the client.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-4402283548766807872.post-44304502950502125772016-01-31T16:40:56.656-05:002016-01-31T16:40:56.656-05:00Hi Unknown
It would be aggressive and could be ch...Hi Unknown<br /><br />It would be aggressive and could be challenged by the CRA, but I have seen it done.<br /><br />Re HST -Not sure, I dont really deal with anyone who uses quick method.The Blunt Bean Counterhttps://www.blogger.com/profile/11358868550072516313noreply@blogger.comtag:blogger.com,1999:blog-4402283548766807872.post-71549401518535092362016-01-31T09:48:08.382-05:002016-01-31T09:48:08.382-05:00Hello Mark,
My corp has a contract with a major b...Hello Mark,<br /><br />My corp has a contract with a major bank. The only deduction in the corp is professional fees for the T2 preparation, bank fees and salary (no retained earnings ever). What are your thoughts on me then taking other employee deductions on my T1 with a T2200 that I issue to myself against the employment income from my corp. To dedcut things like home office supplies, research journals etc.<br /><br />Further i remit HST based on the quick method (percentage based on a project management business), which essential allows me ITCs even though technically i have no expenses that i can corporate deduct anyways. Do you see that a red flag for a HST audit. Anonymoushttps://www.blogger.com/profile/18144216351676941267noreply@blogger.comtag:blogger.com,1999:blog-4402283548766807872.post-801764056477568232016-01-07T00:25:02.923-05:002016-01-07T00:25:02.923-05:00needTax Help,
if you provide your services in Ca...needTax Help, <br /><br />if you provide your services in Canada, you may be eligible for the small biz deduction. Speak or engage an accountant to review your specific situationThe Blunt Bean Counterhttps://www.blogger.com/profile/11358868550072516313noreply@blogger.comtag:blogger.com,1999:blog-4402283548766807872.post-46766889024404291552016-01-06T20:39:19.433-05:002016-01-06T20:39:19.433-05:00HI ikrananka,
I am being faced with a similar sit...HI ikrananka,<br /><br />I am being faced with a similar situation. All work will be based out of canada, but I will be providing engineering services for a US based corporation, who does not have a legal entity here in Canada.needtaxhelphttps://www.blogger.com/profile/04819506936198409121noreply@blogger.com