Category Archives: Tax Planning

Odette Morin

Should you incorporate or remain a sole proprietor?

Inc or not

Setting up a professional corporation can be easy and financially beneficial, but before you decide to incorporate, it helps to consider the pros and cons and make sure that your profession allows it.

There are many advantages to being incorporated which I will list below but it may not be needed just yet unless there is a potential liability. For many self-employed individuals, there is rarely a need to be incorporated unless they make an income greater than what is needed to live. For most very successful self-employed, it is not a matter of if they should be incorporated, it is a matter of when they should do it. Here are the details.

There are two main reasons to incorporate:

1.Liability potential: Can you be held legally responsible for the work you do? Could you be sued and potentially lose a significant part of your personal assets? If the answer is yes, you need to incorporate now to protect these assets regardless of the tax situation. This just makes sense.
2.Tax saving: The rule of thumb regarding the tax aspect of incorporation is that you need to keep in the corporation about $50k. The resulting tax saved by keeping that $50k in the corporation will offset the annual costs of accounting and bookkeeping. In other words, if you need all of the money you make to pay bills and pay for your lifestyle and nothing gets saved in the corporation, there is no tax advantage to incorporating. If you only need to draw a portion of the self-employment income and at least $50k can stay within the corporation, the personal and corporate combined tax owing will be less. Please remember that you would also be able to direct funds from the corporation to your RRSP tax-free effectively transferring money from the corporation to you personally without immediate tax. Therefore, the $50k is after the RRSP contribution. If you do make enough to draw the salary you need, maximize your RRSP and still have $50k left in the corporation, you should incorporate. The funds left in the corporation not required in the short-term can be invested for retirement as well.

If you are just starting out, I would wait at least a year before incorporating unless there is a large liability potential. You will know by then whether you like being self-employed and how much money you will be making. Incorporating will cost you anywhere from $2500 to $5000. This is a one-time up-front cost. The accounting fees are generally about $2500 to $3000 per year.

Here are more details on how a professional corporation can help with your tax planning.

1. Tax deferral on corporately retained earnings:

·As long as the money earned by shareholder in his corporation, stays in the business, personal tax won’t be due on the amount until it’s paid out to shareholders (you, your kids or spouse). Your money doesn’t need to be paid out; it can stay in the business for years.

·It’s best to leave at least $50,000 a year in the business to justify the cost of incorporating.

2. Income splitting:

·Some professions allow family members to hold non-voting shares. In these cases a spouse or child (over 18) who is not active in the business can share a part of the professional corporation’s after-tax income by receiving dividends on shares they own directly or indirectly.

·If your children are 18 or older and earning income that puts them in a low tax bracket, the family will pay less tax overall than if the professional personally earns all the income.

·Accumulation of equity: With more after-tax income inside the business, you can accrue assets faster than if you used your money on personal expenses.

·Dividend-sprinkling shares: This is a cost effective alternative to trusts involves issuing various classes of common shares to each family member, permitting the corporation to pay dividends on one class of shares to the exclusion of others. Paying family members dividends instead of a salary should be considered in some cases because salaries paid are subject to reasonableness tests. Dividend payments are not subject to the same test.

3. Tax savings with cheaper non-deductibility

·Consider having the corporation incur non-deductible expenses such as life insurance premiums. Since a professional corporation pays tax at a lower rate than an unincorporated professional, the cost of non-deductibility is less.

The benefits of incorporating don’t end there. Setting up a professional corporation can help professionals in their retirement years as well.

Dividends after retirement

·It’s not imperative that a person closes their professional corporation when they retire; funds can be left in the professional corporation to grow. The company can retain the earnings and pay them out as dividends.

Individual pension plans (IPP)

·An incorporated professional can have a pension plan established by the corporation for their benefit. Contributions are made to this plan instead of an RRSP.

Probate tax

·In some provinces, creating a corporation can significantly reduce probate taxes at death, using a secondary will to address the transfer of shares after death.

While there are some great benefits to incorporating, there are a few drawbacks as well.

·Start-up and annual costs are high
·A lawyer is needed to set up a professional corporation. In some situations this can cost upwards of $3,500.
·The cost of moving existing assets into a corporation can run between $5,000 and $7,500.
·Additional tax returns are needed
·Your client will be required to fill out a T2 for corporate returns. They’ll also need to file an annual corporate financial statement, which can cost $1,500 – $3500.

Please contact us to further discuss your situation. You can reach us at 604-878-0702 for Anthony, Odette or Terry.

Please note remember that we are not accountants. This is only a very general summary of the advantages and disadvantages of incorporating. It is provided in a financial planning perspective. Only a qualified accountant can give you professional advice.

Odette Morin

NEW lower RRIF minimum payment rules effective now: consider your options


We are writing to advise all annuitants of Registered Retirement Income Fund (RRIF) held with us of changes to the required minimum annual withdrawal amounts as a result of regulations introduced in the Federal Budget released April 21, 2015.

Specifically, the budget introduced a reduction to the prescribed required minimum annual withdrawal factors for RRIF annuitants 71 to 94 years of age. Starting in 2016, this reduction will result in decreasing the amount that RRIF annuitants will be required to withdraw as a minimum amount during those age years.

This applies to RRIF accountholders who are setup to receive the minimum payment only. If you are setup to receive a fixed amount (ex. $500 a month), you will not be affected.

The table below provides a comparison of the new and old RRIF factors.


All RRIFs 2015+ Post-1992 RRIFs
prior to 2015
71 0.0528 0.0738
72 0.0540 0.0748
73 0.0553 0.0759
74 0.0567 0.0771
75 0.0582 0.0785
76 0.0598 0.0799
77 0.0617 0.0815
78 0.0636 0.0833
79 0.0658 0.0853
80 0.0682 0.0875
81 0.0708 0.0899
82 0.0738 0.0927
83 0.0771 0.0958
84 0.0808 0.0993
85 0.0851 0.1033
86 0.0899 0.1079
87 0.0955 0.1133
88 0.1021 0.1196
89 0.1099 0.1271
90 0.1192 0.1362
91 0.1306 0.1473
92 0.1449 0.1612
93 0.1634 0.1792
94 0.1879 0.2000
95+ 0.2000 0.2000

Generally speaking there is about a 2% decrease in required minimum withdrawals. For example, if you are 75 years old and you have a RRIF with a $100,000 balance, the old minimum amount $7,850 and the new minimum

is $5,820. In this example, you have $2,030 less in taxable income.

Since this change was introduced well after the start of the year but is effective for 2015, you have a few options for 2015:

  1. Minimum Amount - You can choose to take this year’s minimum payment based on the old calculations, in which case you do not need to do anything further (recommended action).
  2. Re-contribute - If you have already, or by the end of the year will have received the required minimum annual withdrawal amount based upon the old factors, you have the option of re-contributing the excess amount to your RRIF. The deadline to make a re-contribution is March 1st, 2016. You will be issued a T4 for the amount withdrawn and an offsetting contribution slip for the re-contribution for your 2015 tax filing (we do not recommended this action, enjoy the extra money for 2015!)
  3. Adjust Payments - You can choose to adjust any minimum payment(s) not yet paid to reflect the new lower calculation. In this case we will require formal updated instructions from you.

No action is required on your part unless your payment(s) are based upon the minimum required withdrawal and you wish to take advantage of the lower required minimum withdrawal for 2015, or wish to re-contribute the excess withdrawals for 2015.

Most RRIF accountholders who are setup to receive the minimum will likely welcome the decrease in payments.

Odette Morin

Enhanced Child Care Benefit starts today!


Many Canadians are about to receive the largest one-time benefit payment in federal history. The Harper government is sending out its enriched Universal Child Care Benefit (UCCB) starting today.

And since the payments are retroactive to January, families will receive cheques or direct deposits representing a total of  $3-billion payout.

The UCCB was increased to $160 per month for each child under the age of six.  The retroactive payment will be $360 per child.

The UCCB was expanded to children aged 6 through 17.  Formerly none were paid. Parents will receive a benefit of up to $60 per month for each child in their care aged 6 through 17.  The retroactive payment will be $360 per child.

How will you spent the enhanced Child Benefit?  or will you be saving some of it?  Let us know your plans!

Find out the details here

Odette Morin

Are we in a recession? Who cares?

Read this great article from Andrew Coyne.  It is very well said. Here is an except:
“The media fascination with whether we are or are not in recession is age-old. It reflects our general preference for binary oppositions: up-down, right-left, in-out. We like trials (convicted-acquitted) and hockey games (win-lose: don’t even think of calling it a tie). So much so that where no such opposition exists, we make it up. What did we learn about the candidates in the televised debate? Who cares? Just tell me who won, and whether there were any knockout blows. We don’t like grey zones, or judgment calls. We desire rules, finality, seeming precision.”

The full article is here

Odette Morin

The New RRIF withdrawal rules

Federal Finance Minister Joe Oliver tabled the 2015 federal budget on April 21, 2015. This commentary summarizes the changes in the new budget that affect retirement income and savings. Budget changes that do not relate to retirement income and savings have been covered extensively by many accounting and tax advisory firms and will not be covered in this commentary.

Main Change – Minimum Withdrawal Factors for Registered Retirement Income Funds (RRIFs)

The main retirement-related change introduced in Budget 2015 is to adjust the RRIF minimum withdrawal factors that apply in respect of ages 71 to 94, as follows:

Age (at start of year) Existing Factor New Factor
% %
71 7.38 5.28
72 7.48 5.40
73 7.59 5.53
74 7.71 5.67
75 7.85 5.82
76 7.99 5.98
77 8.15 6.17
78 8.33 6.36
79 8.53 6.58
80 8.75 6.82
81 8.99 7.08
82 9.27 7.38
83 9.58 7.71
84 9.93 8.08
85 10.33 8.51
86 10.79 8.99
87 11.33 9.55
88 11.96 10.21
89 12.71 10.99
90 13.62 11.92
91 14.73 13.06
92 16.12 14.49
93 17.92 16.34
94 20.00 18.79
95 & over 20.00 20.00


The existing factors were determined on the basis of providing a regular stream of payments from age 71 to 100 assuming a 7% per annum nominal rate of return and indexing at 1% annually with factors capped at 20% for ages 94 and over. The new factors were determined assuming a 5% per annum nominal rate of return and indexing at 2% annually with factors capped at 20% for ages 95 and over.

Minimum withdrawal factors for ages 70 and under remain unchanged and continue to be determined by the formula 1 / (90 – age). Note that at the time of establishing the RRIF, individuals also have the option to base the minimum withdrawal amounts on the age of their spouse or common-law partner.

Similar rules will apply to those receiving annual payments from a defined contribution registered pension plan (RPP) or a Pooled Registered Pension Plan (PRPP).  These new factors will also apply to minimum payments from an Individual Pension Plan (IPP) after age 71 for members who are controlling shareholders or related persons.

The new RRIF rules have not been formally.  Stay tuned.  We will update you.

Odette Morin

New $10,000 TFSA limit approved









The CRA has come out and confirmed that the TFSA increase to $10,000/year is effective immediately (before budget gets passed into Law).  You can top up your limit now.
The total maximum contribution from all previous years to date is $41,000.  If you have maximized every year, and have already made your $5500 contribution this year, you can now add $4500.
Contact us if any questions or wish to make your top up TFSA contribution now. email hidden; JavaScript is required