Case Study – Medical Professional
Dr. TK is a medical doctor. He is married with two children attending university. He has a receptionist, plus his spouse, who do the bookings and billing for him. The receptionist is on hourly payroll. He has a corporation with a July year-end.
For income splitting, we set up a Family Trust so that the two children enrolled in university have their costs paid by the Family Trust and pay no tax on their income.
For bookkeeping, we run all the expenses of the professional corporation through a corporate credit card and bank account. Every month, Dr. TK forwards us the bank statements and copies of the cheques via fax, email or FTP. This enables us to do the monthly bookkeeping.
We are also provided with the hours worked by the receptionist, so we can prepare the payroll and calculate the amount of her bi-weekly pay cheque. During the year, we oversee payroll deductions to CRA and filing of the T4 slips in February.
After we receive the bank statements in July, we start working on Dr. TK’s year end. Every September we complete his financial statements and prepare a tax planner for his current year. This allows Dr. TK to optimize the taxes between his personal taxes for himself, his family and his corporation.
During this meeting we cover:
- Any major changes to Dr. TK’s investment strategy
- Major personal expenses coming up
- Estimate his investment income
- Income splitting to confirm dividends and salaries
- RESP, RRSP and TFSA considerations
- Confirm salaries for himself
After the tax planning meeting we prepare a package with 3 sets of documents:
- Dr. TK’s copies of Financial Statements, Tax Returns, Tax Planner and copies of all documents needing signatures
- CRA Payments for the next 12 months to include:
- Corporate tax payable and corporate tax instalments
- Monthly/Quarterly remittances to include:
- Payroll deductions
- WorkSafeBC remittances
Dr. TK prepares all the cheques and gives them to us. We are then responsible for ensuring the cheques are the correct amount and sent to Canada Revenue Agency on time. In March, Dr. TK sends us his personal tax documents. We then prepare his personal tax return, review the Tax Planner done at the time of his corporate return, and forward his personal tax return to him for signatures.
Case Study – Manufacturer
RS is a manufacturer with a December year-end. He has four employees paid on an hourly basis and uses subcontractors to get the balance of his work done. RS and his spouse work together in the business and have three children. Two of the children attend university and thethird one is working. Each year they generate income in excess of their spending of approximately $300,000. RS uses these funds to invest in real estate.
A Family Trust with an investment corporation as an additional beneficiary has been set up for RS. This allows the excess cash to be moved into the investment corporation so that RS pays tax at the low rate of 15%; the excess funds are then able to be invested in real estate.
RS has three bank accounts with online banking:
- Corporate business account
- Corporate US $ chequing account
- Corporate Visa
As RS’s provider of Vancouver accounting and bookkeeping services, Murji, Yim & Associates has online access to the company bank accounts (restricted to viewing and downloading the documents). Each month the statements are downloaded by us and the necessary bookkeeping is completed. RS faxes our bookkeepers the payroll every two weeks; we prepare his payroll and fax it back. RS then writes the cheques for his employees.
RS keeps track of his billing and collections. He provides us with his quarterly sales and A/R listing every three months and we prepare the following:
- Bi-weekly payroll
- Monthly payroll deductions sent to CRA with their cheques
- Quarterly GST and WorkSafeBC prepared, filed, and paid on time
- Annual WorkSafeBC return prepared, filed, and paid on time
- Annual Financial Statements and corporate tax returns
- Corporate tax returns and instalment payments sent to CRA
- Analysis and review of key performance indicators for his business
- A tax planner in October to ensure income splitting is done correctly
- Prepare Financial Statements for the investment corporations
- Prepare Trust returns
- Prepare T4, T3/T4/T5 Slips
- Prepare T5013 Slips – Subcontractors report
- Personal tax returns for each of the family members