Payroll vs Dividend
- All businesses, business owners are unique – and this is why there are options on how you can pull out your $ to pay your own bills.
- Payroll – you would open an RP (payroll) account with CRA – under prior example: 12345 6789RP0001
- You will be required to remit source deductions monthly (or quarterly if you run a year and apply for this amendment)
- DO NOT BE LATE ON YOUR SOURCE DEDUCTIONS – even a day late will cause a major late penalty fee and interest – you do not want to be a repeat offender
- Dividends – this is where you are withdrawing funds directly from your business or incurring personal charges – these all get coded to shareholder account, and at the end of your year end, if your shareholder account is in a DEBIT position, you are required to file a dividend. CRA will allow you ONE year where shareholder is in DR position, after that they will flag you as misappropriating your funds.
- NOTE: if you have a fiscal year end of example: Feb28 2022 you can opt to declare your dividend in 2021 (Dec 31) or 2022 (Feb 28) depending on the most advantageous for personal tax purposes.
- Payroll – you would open an RP (payroll) account with CRA – under prior example: 12345 6789RP0001