Source Deductions For CA4IT Clients

In most situations ca4it clients declare a bonus to directors of the corporation only once a year (typically on December 31). Throughout the year Directors may access funds from the corporate bank account to pay for expenses on behalf of the organization. However, the tax planning is done once a year during the review meeting and a one time bonus is paid. This means that source deduction only need to be paid once a year (either January, 3, 10 or 15 depending on your Remitter type). This is different from many other firms that would declare a salary on a monthly basis and requires monthly sourced deduction remittances.

The reason that ca4iT does this differently is three fold.

First, it consultants have a different structure than most corporations, in that typically the only employees are the directors themselves.

Secondly, by paying the source deduction only once a year you will reduce the administration and accounting cost plus you will have access to the time value of the Money.

Thirdly and most importantly, this ensure that we will have all available information on hand when we make a decision on the tax planning for your corporation.

For example it is not that un-common for Consultants to move back and forth from fulltime to contract. This will very rarely happen at the exact end of your fiscal period. This can have a significant impact on the tax planning. For Example if you were to pay sourced deduction on a monthly basis then take a full time position half way through the year. This would mean that the tax planning done at the beginning of the year is no longer valid. In fact you would probably want to declare no salary from the corporation. Back peddling from this unforeseen situation can be difficult and costly.

While most junior auditors may tell you that you are not allowed to pay source deductions on an annual basis they are wrong. We have been using this strategy foralmost 2 decades and have successfully defended this strategy on more than one occasion. If you do receive a letter or call from CRA you should either direct them to us or simply state that you have no eligble employees with any eligible remittances during the period and that you do not expect any further remittances until January. Do not attempt to explain this further as there is some very specific language used for sourced deductions and saying the wrong thing cause you some unnecessary headaches with CRA.

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