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Trusted Saskatoon Bookkeeping & Tax Services Books & Billing Explains Dividends Vs Salaries

Books ’N’ Billing offers full-service, cloud-based, bookkeeping services to sole proprietors, limited liability partnerships, and small corporations within Saskatchewan. Are you a small business owner? Save yourself the stress and let Shelby Prescesky the owner of Books 'N' Billing help you get your business's books in orderBooks N Billing is a Trusted Saskatoon Bookkeeping & Tax Services Specialist. In this article, she shares the difference between dividends and salary. 




Dividends Vs Salary? 



If you own an incorporated business in Canada, you have the option to pay yourself through dividends, a salary, or a combination of both. In this article, we will look at the difference between these methods of payment and the main advantages and disadvantages associated with each. We will also see some common scenarios for when a business owner may choose one method over the other.

Salary/Wages

If you are paying yourself a salary or wage, the payments become an expense of the corporation and then employment income for you personally – at the end of the year, you’ll get a T4 slip outlining your taxable earnings and deductions. The expense reduces the corporation’s taxable income, which in turn reduces corporate taxes owing.

To pay yourself a wage, the corporation will need to register a payroll account with the CRA, and then the corporation will need to withhold source deductions from each of your paychecks to later remit to the federal government. Additionally, the corporation will have to prepare T4 slips at the end of each calendar year to record your work for the year.

Why Choose Salary


Paying yourself a wage can be a way for you to earn a steady and predictable personal income. Some additional advantages of using this method would include:


  • RRSP Contribution Room; Paying yourself a wage will allow you to build an RRSP contribution room while dividend payments will not create this.

  • CPP Contributions; this is a double-edged sword, while wages will allow you to contribute to the Canada Pension Plan, as the owner of the corporation you will also be responsible for the employer’s portion of this contribution. 

  • Fewer Surprise Tax Bills; Income tax is withheld from each payment and remitted to the Receiver General. When you file your personal tax return you will have already paid income tax and will avoid a surprise personal tax bill. When paying dividends, income tax isn’t withheld and remitted which often creates personal taxes owing in April.

  • When Applying for a Mortgage; When you are attempting to qualify for a mortgage, banks like to see steady, predictable income. Earning employment income like this will help show that steady income, whereas dividend income may not be looked at as favourably. 

Dividends

Type of Transaction

Dividends are payments to shareholders of a corporation that are paid from the other tax earnings of the company. This means that dividends are not a corporate expense and do not reduce the corporate taxes paid. The flip side is that dividends carry less personal tax liability than wages because they come with a dividend tax credit.

In practice, paying dividends to shareholders of a corporation is fairly easy. Dividends are declared and cash is transferred from the corporate account to a shareholder’s personal account. Each year, the corporation must prepare and file T5s for any shareholder who received dividends.

Where it gets tricky with dividends is that they are issued and paid based on share ownership. As an example, of Terry’s Tulips :td. Want to issue $100,000 in dividends to the owners of its Class A common shares, it must do so based on the percentage of ownership of these shares. So, if Terry owns 40% of Terry’s Tulips class A shares and Teagen own the other 60%, then Terry would receive $40,000 and Teagen would receive $60,000. This can make it difficult to allocate different amounts of income to multiple shareholders of they all own the same class of shares.

Why Choose Dividends

Paying dividends can be a simple way for business owners to withdraw money from their corporation. Some key advantages include:

  • Lower Cost; Paying dividends removes the need to contribute to CPP, which reduces corporate and personal costs. The downside is that it does not allow you to contribute to the Canada Pension Plan program.

  • Simplicity; if you own 100% of your corporation, you can just declare a dividend and transfer cash from the company to your personal account without the need for payroll or remittance of source deductions.

  • Less Chance for Payroll Penalties; Payroll remittances are relentless. Usually, they have to be paid each month and late payments come with high penalties. Paying dividends eliminates the chance of late or missed payroll remittances. That being said, filling of T5s still must be completed on time once per year when paying dividends. 

Which Method Creates Less Tax?

So, the main question becomes “which method allows me to pay less Tax?”. While this is a very important question to ask, changes to the legislation beginning in 2018 have made it more difficult to reduce taxes by cheesing one method over the other. Often, the results of calculations show a fairly minimal tax saving one way or another, and there is a reason for that.

Integration

There is a tax concept called integration that legislation aims to implement. The main idea behind this is that there should be little to no difference in the overall income tax paid (personal + corporate) when comparing dividend payments and wage payments of the same amount. This works by;

  • Wages reduce corporate taxes, but in turn create higher personal taxes than dividends.

  • Dividends do not reduce corporate taxes but create less personal taxes than wages.

Dividend Sprinkling

In the past, corporate shareholders could skirt the issue of integration and tip the scales of tax savings in their direction by using a technique called dividend sprinkling. This was accomplished by spreading out dividend payments to a lower income earning spouse or adult family member. Because the spouse or adult family member are in a lower tax bracket than the person operating the business, there would be less personal tax to pay on their dividend income.

Now that it is more difficult to implement dividend sprinkling, it is especially important to consider the qualitative factors discussed earlier when deciding which method of payment to use.

Common Scenarios

Lastly, let’s look at a few common scenarios that we see and discuss what you might consider as a business owner in each case.

  • Bad at Administrative Tasks;  If making payments on time is a weakness that you have, then it may be easier and less costly to pay yourself using dividends. Wages require the regular, on-time payment of source deductions. If source deduction payments are missed or late, the penalties can add up quickly.
  • Qualifying for Financing; If you plan on purchasing a home in the near future and know that you will need to qualify for a mortgage, it may be better to pay yourself as an employee (wages/salary). Banks like to see steady income more than sporadic dividend payments.
  • Having Children / Parental Leave; If you plan on having children sometime soon and you would like to earn Maternity or Parental Benefits, then it may be better to earn income through wages. This is because withholding and remitting employment insurance premiums can enable the employee to collect maternity or parental benefits.
  • Working Income Tax Benefit; The working income tax benefit is a refundable tax credit intended to provide tax relief for eligible working low-income individuals and families. It may be beneficial to pay yourself a small salary from your business to trigger this tax credit on your personal taxes. Consider this if you have low personal or family net income for the year.


Shelby's mantra and the business tagline is one most small business owners can get behind...

Running your own business can be exciting… managing your own books can steal your joy.


If you need a second opinion, or you are at that stage in your business where you are ready to hand over the bookkeeping to a professional contact Shelby at Book N Billing today! 

 Books N Billing Bookkeeping Services Include: 

Books N Billing is a Trusted Saskatoon Bookkeeping & Tax Services Specialist 



The Trusted Saskatoon team brag about Books N Billing Bookkeeping & Tax Services

Books ’N’ Billing offers full-service, cloud-based, bookkeeping services to sole proprietors, limited liability partnerships, and small corporations within Saskatchewan. Are you a small business owner? Save yourself the stress and let Shelby Prescesky the owner of Books 'N' Billing help you get your business's books in order.Books N Billing is a Trusted Saskatoon Bookkeeping & Tax Services Specialist 

Meet Shelby Prescesky Of Books N'Billing


Whether you sell handmade soap, own a coffee shop, or drive a truck for a living, there are two things we can guarantee about your business: you earn money and you spend it. Bookkeepers are the ones who help you keep track of all that. We sat down with Shelby, the owner of Books N Billing, to find out why she decided to be a bookkeeper, what she enjoys about the job and who would be an ideal client for her. 

Shelby has always enjoyed numbers, in high school she earned University credits for pre-calculus, a subject that makes most people shudder. Shelby however, enjoyed the challenge and she elected to take an additional accounting class, it didn't take her long to decide that this is what she wanted to do for a living! 

Shelby gained her Bachelor of Commerce ( B.Com), which is an undergraduate degree in commerce and related subjects. The course is designed to provide students with a wide range of managerial skills and understanding in streams like finance, accounting, taxation and management. After finishing school, her first job on her chosen career path was with The City of Saskatoon. Shelby really enjoyed the job and the people she worked with. The role was a great experience, and she was able to learn about many different industries and see how a huge organization operates. Shelby started off doing payroll for the Police Department, and later moved into the Planning and Building departments, where she learned about the construction process and dealt with everything from books to permits!  

What Does a Bookkeeper Do? 

A bookkeeper is someone who prepares your business accounts, documenting daily financial transactions. Bookkeepers have been around as far back as 2600 BC—when records were tracked with a stylus on slabs of clay—making bookkeeping, not the oldest profession, but pretty darn close. Today any bookkeeper worth their beans uses some kind of software platform to track finances, and Shelby takes pride in always being up to date with the latest industry news and technology. 

Shelby comes from a family of female entrepreneurs, both her Mother and Grandmother operated restaurants and catering businesses, so she knows what it takes to be her own boss. Shelby is not afraid of hard work, and she decided to start her own business in 2021,  just after the birth of her 2nd child. As she said, motherhood is great preparation for entrepreneurship, and she enjoys the flexibility of setting her own work schedule at home, around the needs of her young family.

We asked Shelby what the benefits are of hiring a bookkeeper if you have a small business. She shared that her clients tell her that the peace of mind knowing that their books are in order and that filing isn't an annual scramble, cannot be overrated! Shelby makes sure to bring her expertise to the table for her clients. She prides herself on her expertise and she wants to be seen as a valuable part of her client's team. Her biggest driver is helping people,  and her enthusiasm for that is infectious! 

We asked Shelby what being trusted means to her. 

" Trust means reliability - giving your business details and accounts to someone who’s a total stranger is a risk, so it is important to operate with integrity and have ethics at the centre of all I do. I strive to be a valuable resource for clients. " - Shelby , owner Books N Billing   


As one of her clients said so well when we spoke to them as part of the unique Trusted verification process ...

" Shelby is wonderful to deal with, she answers all my questions and breaks things down in real speak. if she is not 100% sure of the answer she will go off and find the information before committing. I highly recommend Books n Billing if you are small business in need of a trustworthy bookkeeper!"  

When asked who would be an ideal client for Books N' Billing. Shelby shared that her ideal niche is small to medium businesses with less than 20 employees. She really wants to focus on serving local businesses in Saskatoon, Warman, Martensville and surrounding areas. Shelby has a wealth of experience to offer, and in particular, she has done a lot of work for clients in the trucking industry, she knows the industry well as many family members are truckers! 


Shelby's mantra and the business tagline is one most small business owners can get behind...

Running your own business can be exciting… managing your own books can steal your joy.


If you need a second opinion, or you are at that stage in your business where you are ready to hand over the bookkeeping to a professional contact Shelby at Book N Billing today! 

 Books N Billing Bookkeeping Services Include: 

Books N Billing is a Trusted Saskatoon Bookkeeping & Tax Services Specialist 








Trusted Saskatoon Financial Advisor Cliff Wiegers Tip On The Benefits of Business Coaching

Wiegers Financial & Benefits is one of the largest private financial planning and employee benefits consulting firms in Saskatchewan. Their Financial Planning Division provides business owners, households, retirees, and students with expert investment and insurance planning services to help them reach their long-term financial goals. They also have a Benefits and Personal Insurance planning division. 


Wiegers Financial & Benefits are Trusted Saskatoon Financial Advisors. Cliff Wiegers shares his experience and the many benefits of business coaching in their latest Wiegers Financial tip

The Life-Changing Benefits of Business Coaching

In 1991, I joined a coaching program called The Strategic Coach which was run by Dan Sullivan out of Toronto. The program has since gone international and has thousands of participants involved globally. Put very simply, it is intended for individuals who are interested in growing both personally and professionally. The goal is for participants to have a great personal life with lots of time off, as well as a great business that generates a lifestyle for them that allows them to live a preferred life.


Why Consider Business Coaching?


Most people think that in order to be successful in business, you have to give away all of your time or to have time off you have to give away money. This program helped me build a good business and have a great personal life. The program offers tools that I can use to enable me to have both personal and professional growth. If you are a business owner, at some point you will likely develop the feeling of complexity. What this means is you simply have run out of time and you can’t get any more results. In fact, running out of time means that you have already potentially cut into a lot of your own personal time as well. The program that I got involved with is not the same program that I’m in today but has many similar characteristics. 


In order to achieve personal and professional growth, you need to have a good team around you. You must identify what your unique abilities are and try to operate in that area. By doing this, you will generally work in areas of your business that give you energy and are usually associated with the highest economic bang for the buck. This means you have to delegate. In order to delegate, it’s critical that you empower people by ensuring they know what they are doing and have the necessary tools and resources. You will also be building empowerment so that bigger results can be made, and making an investment back into your business. Many times when business owners are adding employees they look at it as a cost. It is actually an investment and, if done properly, will yield results that are greater than what you invested.


This is just scratching the surface on coaching and what it’s done for me. If you ask me who needs coaching in business, I would say that everyone needs coaching. But it’s important also that you hit that scene of complexity, you still want to grow, and you’re willing to spend the time and money to do so. If each of those criteria is met, business coaching is something I strongly recommend you pursue.

Clifford A. Wiegers

CFP, TEP, CH.F.C., CLU, B.Comm.

Insurance Representative, Wiegers Financial and Insurance Planning Services Ltd.

Financial Planner, Manulife Securities Investment Services Inc.


Contact them today for a no-obligation consultation to determine how they can help you.


Wiegers Financial & Benefits are Trusted Saskatoon Financial Advisors 

Trusted Saskatoon Financial Planners at Wiegers Financial & Benefits Help Keep Your Financial Plan Current

Wiegers Financial & Benefits is one of the largest private financial planning and employee benefits consulting firms in Saskatchewan. Its Saskatoon Financial Planning Division provides business owners, households, retirees, and students with expert investment and insurance planning services to help them reach their long-term financial goals. They also have a Benefits and Personal Insurance division. 

They explain everything you need to keep current in your financial plan in their latest Wiegers Financial tip. Wiegers Financial & Benefits are Trusted Saskatoon Financial Advisors 




Up to Date or Out of Date? Everything You Need to Keep Current in Your Financial Plan

It seems like just yesterday that we first started hearing about the COVID 19-virus, and now it’s been almost a year of uncertainty with only a blurry horizon in the future. What that horizon will look like, or when we will reach it, is still unknown but the hope is that we get there soon… and that we can hold our loved ones tight again!

As we all know, life can change in an instant, leaving our best-laid plans torn to pieces. However, it is critically important to pick up the pieces and find the new course we are to take so that despite the interruption, we can get to where we want to be. As a Certified Financial Planner with Wiegers Financial & Benefits for almost seven years, I have experienced with every client some kind of change in their lives and ultimately their financial goals. Given that life is not stagnant, it’s critically important that your plan and goals change with it to keep up.

What kind of life changes can impact your financial plan? Any number of things can change your goals but some of the most common changes are those concerning:

  • Job and pension
  • Income
  • Marital status
  • Dependents (children or elderly parents)
  • Real assets (e.g. primary residence or rental properties)
  • Other investments
  • Insurance policies
For instance, if you changed jobs due to COVID-19 or something else, your pension might have changed too, which will impact your projected retirement income. Without advising your advisor and potentially modifying your plan accordingly, you might find yourself behind, or ahead, of your retirement goals.

As another example, a change in your marital status or in how many dependents you have and who they are could make your beneficiary designations outdated. The last thing you likely want is for your insurance benefit to be paid to people you no longer want to receive it, or for any loved ones – including children – to be left out (and potentially taking the issue to court in an attempt to get it sorted out in their favour). Given that the solution to avoiding this kind of upset is a simple beneficiary change, it makes a world of sense to ensure that you regularly review your beneficiary designations to ensure that they remain current with your plans and wishes.

Life changes; so should your financial plan. If you have any questions or wish to review your financial plan, please speak with your financial advisor.


Kim Chicoine, CFP, B.Comm.
Insurance Representative, Wiegers Financial and Insurance Planning Services Ltd.
Financial Planner, Manulife Securities Investment Services Inc.


Contact Wiegers today for a no-obligation consultation to determine how they can help you.

Wiegers Financial & Benefits are Trusted Saskatoon Financial Advisors 

Trusted Saskatoon Financial Advisors at Wiegers Financial & Benefits Share Information on Farm Estates

Wiegers Financial & Benefits is one of the largest private financial planning and employee benefits consulting firms in Saskatchewan. Its Saskatoon Financial Planning Division provides business ownershouseholds, retirees, and students with expert investment and insurance planning services to help them reach their long-term financial goals. They also have a Benefits and Personal Insurance planning division. In this latest Wiegers Financial tip they share information and advice for  Farm Estates Wiegers Financial Benefits are Trusted Saskatoon Financial Advisors and Trusted Saskatoon Insurance and Group Benefits experts 

The Future of Your Farm's Estate: Top 6 Considerations

As a Canadian farmer, you’ve lived through your fair share of unpredictability. Whether it was the farm crisis or one too many years of lackluster harvests, you took your farm through the worst combinations Mother Nature and the markets could throw at you, beating the odds to build something your family is truly proud of.

Looking back at the ups and downs of farming, you’d never take any of it back. And you want to leave the challenge behind for the next generation so that your family’s legacy can continue to flourish long after you’re gone. Successful farmers are constantly thinking about what’s next. If you’re over 50, planning the future of your farm should be your top task. The work you put in now could set your farm’s estate up for one of the most anticipated outcomes in your entire farming career. You know how rare that can be in the agriculture industry!

Speaking of your career, you’ve worn many hats over the years: accountant, labourer, veterinarian, weatherman, mechanic, scientist – the list goes on. Through the demands of your job, you’ve learned to ask for help when you need it. So if you’re willing to call your neighbour down the road at harvest, you should be willing to work with the expert up the street on financials.

A financial advisor provides leadership when you need it. They have your best interests in mind while navigating the blind spots of your farm’s estate, connecting a knowledgeable team of specialists to determine how to best plan your family farm’s future. The most common regrets farm estate financial advisors hear from farmers are that they wish they would have talked about it either ten years earlier before they lost their health, or before inflation led to a big misstep in their tax strategy.

You may be thinking about farm estate planning because you’ve been pressed by your child who’s made sacrifices for the farm or you’ve witnessed what happens when farmers leave a mess behind. Don’t wait until things fall apart. If you have a lot of unanswered questions about your farm’s estate, proper planning will bring clarity to problems that exist and provide answers that may solve them. Bring in your biggest concerns and prepare to give your financial advisor honest answers to the following questions.

These are the top six considerations when you're farm estate planning:

1. How do I want to spend the rest of my life?

Is it important to maintain the standard of living that you’ve become accustomed to? Or will you sacrifice your standard of living in the future so your kids can farm?

There are a variety of options for either scenario. For example, if you’re retiring, you could potentially sell two-quarters of land so you can continue to live comfortably.

2. How can I minimize the tax impact?

This is a big one as there are many opportunities. Financial advisors minimize the tax impact on a farmer who’s turning the farm over to the children who will be farming moving forward. They do this through a framework of tax minimization strategies such as capital gains exemptions or tax-deferred rollover options.

3. Do I want to consider family harmony?

Having more than one child makes handing off the farm estate to one child a complicated matter. Land prices are high and farm values are increasing to millions of dollars. What happens often is that suddenly you have a $5 or $10 million farm and the children who have not chosen to farm, get nothing or very little as part of the farm estate. Financial advisors try to find out if giving non-farming children a fair payout is a priority. If it is important, they help you get a life insurance plan in place to compensate them when the moment comes. For example, if your farm is transferred to one child, the other two children will receive a large insurance contract.

Sometimes farming children have made sacrifices to help their parents on the farm. They built equity in the farm when they could have worked somewhere else. In other cases, farming children were paid fairly and didn’t have to sacrifice, but the farm value went up and they want a piece of it. It’s critical to look objectively at the effort that’s been made to reward your children fairly.

4. Are my children’s marriages strong?

Your farm could have been in your family for three or four generations. Over that time, your family might have built outside assets and a large nest egg. One divorce could cost half of your family farm and more. Most farmers don’t want to pass their hard-earned estate onto someone who isn’t family. Divorce is common. Talk about how it could affect your farm before the nuptials. Your future in-laws should know your farm is protected in the event of a marital breakdown.

Financial advisors recommend pre or postnuptial contracts. The best time to write this contract is before the marriage but it can happen afterward. For instance, “We’re not passing the farm onto you unless you sign this contract that says if your marriage doesn’t make it down the road, the farm will stay in our family name.” This conversation is critical because farms are now worth millions. If you don’t take precautions on nuptials, half of your family farm could disappear.

5. Is my succession plan viable?

Most farmers choose to pass the land on to their children. But what happens if all of your children go off to university and don’t come back to the farm? If you do have a child who wants to continue farming, have you thought about whether he or she would make a good successor? Financial advisors recognize when people have the financial acumen to run the business and operations side of farming. And when they don’t.

For example, your middle-aged child could have been farming his entire life but doesn’t have a penny to his name. He likely isn’t the ideal financial custodian of your estate. A good financial advisor must tell you what they’ve observed and made sure you’re indicating that in the plan. Otherwise, handing your farm over to a child who continually mismanages money could cost your family’s legacy soon after you sign over the farm. It’s your responsibility to make it possible for your successor to succeed. Whoever you choose, you’ll want to ensure that the farm estate will be financially viable moving forward.

6. What are my objectives?

You and your spouse may have different goals of what to do with the farm estate. For example, one of you may want to transfer everything and the other could be more conservative. Financial advisors will ask questions to find out what’s important to each of you. This will give you an idea of where you may want to compromise and what you’re not willing to let go of. Then, they’ll begin to coordinate legal and accounting to finalize your farm’s estate plan.

You don’t want to leave critical decisions related to succession planning, marital breakdowns, unexpected taxes, and more to a spouse who could be reeling after you’re gone. Managing your farm estate without a plan is the biggest mistake you can make as a farmer. Talk to your Wiegers Financial & Benefits financial advisor if you’re over 50 with questions about your farm estate planning.


Cliff Wiegers, CFP, TEP, CH.F.C., CLU, B.Comm

Financial Planner, Manulife Securities Investment Services Inc. Insurance Representative, Wiegers Financial and Insurance Planning Services Ltd.


Wiegers’ Benefits Consulting Division includes many consultants and support staff who custom-design the most employee-valued and cost-effective group benefit, personal insurance, employee assistance programs, and retirement plans available. Contact Wiegers today for a no-obligation consultation to determine how they can help you.

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