Ways to Reduce Taxes at End of Year - Business Owners
Review income splitting opportunities to use up everyone’s basic personal amounts and other credits. Make sure you’re audit proof.
Maximize RRSP contribution room through salary or bonuses. Remittances must be paid by January 15 and T4's issued by end of February.
Sprinkle dividends effectively among shareholders to minimize tax. T5's must be issued by end of February.
For each person involved, review their personal taxes to analyze the following:
- GST credit
- Child Tax Benefit
- EI or OAS Clawback
- Clawback of Tax Credits such as Caregiver, Dependent and Age credits
- Transferring credits from dependents such as tuition
- Alternative Minimum Tax
- Provincial Tax and Income tested credits
If the company owns the vehicle, determine if it is beneficial to elect to use the reduced operating cost benefit, based on mileage records. Election must be made in writing by December 31. Interest on inter-spousal loans is due by January 31.
Standby charges can be reduced for vehicles if the employee is an automobile salesman. They can be reduced to as low as ½ to 1% of the average value of the fleet. The employer simply notifies the employee of this standby charge amount.
Elect to defer the taxation of income from a qualifying stock option received in the year. The deferment can be until the stock is disposed of, but the election must be made by January 16. The election is based on the value of the stock in they year the option was granted and is set at a maximum of $100,000 per year.
Review the estimated corporate taxes payable and adjust the last instalment payment accordingly.
Determine and payout bonuses and review status of any shareholder loans.
Consider making purchases of assets before December 31 to claim CCA for the entire year (albeit at 50% of the rate). Computers purchased up to January 2011 are deductible at a 100% CCA rate.