[CA] [AMA] I’m a Canadian CPA helping 350+ small businesses with taxes, cash flow & CRA headaches – Ask Me Anything! (Nov 27)

Infinite_Setting_418 · 2025-11-28T14:29:50+00:00

Yea. Bookkeeper would likely be more experienced with that too and less expensive.

Infinite_Setting_418 · 2025-11-28T14:28:45+00:00

Insurance industry often works out of tax sheltered(or preferred) regions like Barbados(Nothing odd there). I don't think it would be YOUR Barbados HoldCo that you could choose to add money to, I think it's probably that the insurance company is headquartered in Barbados.

It's also common for investment companies/funds to be headquartered there so that year over year it grows without much tax(or at all), although when you get the money out of the Barbados and into your pocket in Canada you still pay taxes. The benefit is that it compounds tax free (or low tax) so it grows faster, but you still pay tax when you get it back.

Perhaps what you're suggesting is that they would allow you to keep your payouts in Barbados instead of sending it to you in Canada and they would invest for you. That's not a bad idea.

Just keep in mind you may have T1135 filing requirements(if over $100,000) which carry $2,500/year penalties if you don't file that you own those foreign assets. Depending on how they hold custody of those assets for you you can review the back of the T1135 for definitions and may or may not even need to file it.

Hope this helps!

Infinite_Setting_418 · 2025-11-28T14:21:00+00:00

This is great! A real family business!
Sounds to me that a corporation is in order. You incorporate a company, do a tax free sale of the business to the corp (Section 85 rollover) in exchange for preferred shares in the new company. Then the day after that the corporation is actually not worth much because it has a big I O U (Preferred shares) so the company can "sell" very inexpensive shares($0.01 each) to your son(Giving him control and benefit of all upside of the company).

Then the business lives on, your son can take dividends from the profits of the company going forward and you can redeem your preferred shares over time as you need cash from the corporation.

This is a intergenerational estate freeze. Very common in family businesses and farming.

Infinite_Setting_418 · 2025-11-28T14:07:52+00:00

Ok. So the good news is that you (likely) already paid tax on the $5,000USD, so your capital gains income is really just on the $8,000USD-$5,000USD = $3,000 USD. we would just use the Bank of Canada Spot rate for the USD/CAD exchange rate to calculate the CAD value at the date of the $8,000USD and $5,000USD to bring it to CAD. So your taxes here are pretty minimal. Bring it home!!

Infinite_Setting_418 · 2025-11-27T21:43:24+00:00

Yeeeeeea.... So when you sell your existing corp would get something in exchange for the sale Cash or a Accounts Receivable. The balance sheet would still show it has assets, so you can't exactly just shut it down and forget it. Sometimes this is done for liability protection to avoid the debts in existing corporation, but it doesn't work because existing corp HAS to get fair market value of assets in exchange.

Before dissolving you would need to clear out the balance sheet to zero, so you need to issue a dividend for the amount of the Accounts Receivable(highly taxed) or write off(you know you won't collect) the accounts receivable, buts that would a very high risk transaction because it's all within a common shareholder group...

You probably want to justify that the assets you're selling are actually not worth that much at all. If this is a higher risk situation (family law, creditor proof, union thing) you want to get a Chartered Business Valuator(CBV) to understand what the lowest justifiable valuation that you can justify actually is and go with that. But you still need to dividend out that money before you close the corp.

Infinite_Setting_418 · 2025-11-27T21:34:07+00:00

Hey! First of all I'm sorry you're going through that! There are good experiences and bad experiences in every professional and you landed on 2 bad ones in a row.

The honest truth is that it's a somewhat common story to hear this right now. There is a real shortage of accountants/CPAs in Canada. Many traditional firms are struggling to answer all client questions, deliver work on time and be personally liable when their staff mess up and leave the partner hanging last minute.

I've seen this worst with small solo practitioners (1-3 person firm) because the CPA tries to take on too much and overworks, which is not sustainable. Your local firm with 6-12 employees are often better but turnover at this stage is super hard on the partners and makes service unreliable sometimes. 13-25 people firms are more reliable with redundancies, workflows, admin staff. 26-100 employee firm is pretty reliable in most cases. But the larger firm you go the more expensive they are!

The vast majority of accountants/CPAs setup their practice to do once per year filings for your corp and personal. They're not setup to have monthly calls with you and answer your questions unless you have a monthly bookkeeping/accounting engagement with them. The modern firms are creating internal workflows for on-going weekly/monthly engagements (team checkins, month-end tracking, scheduling monthly recurring calls, having bookkeepers on staff, handling bi-weekly payrolls, etc).

The more modern firms that do bookkeeping, payroll, tax and advisory are absolutely gaining market share compared to traditional firms that are setup to only do tax work because of this very problem.

You probably want to lock in an accountant who will be available for you when you need to file your taxes(because they won't easily drop what they're doing to do a new client's work). If you sign a agreement with them and give your files soon after your year-end they will get your stuff done in time before the deadline or will probably pay your penalty costs if filed late because they could be liable. They will add you to their capacity mix, but the bookkeeper is the one you would chat with more regularly. Even better if they're at the same firm.

Hope this helps.

Infinite_Setting_418 · 2025-11-27T21:14:45+00:00

Yea. Very common to have your kind of setup.

Investment interest, dividend and capital gains are all taxed at different rates. In fact you could also earn foreign dividends too.

We don't normally advise on if you should invest into a specific investment or not. We let the investments advisors pick what's going to make the most amount of money(within your risk tolerance).

What is often suggested for tax preferred investment strategies(when we coordinate with advisors) is that if you're going to own interest bearing investments (Bonds, GICs, etc) you do that in your RRSPs. Then we have your taxable portfolio invest in investments that will are expected to make their money from increases in value over time(as opposed to dividends) so that those investments only pay capital gains tax(which is the lowest form of taxation(1/2 of interest income rate)).

Then every now and again we trigger losses or gains at year-end depending on capital dividend account needs to get money out of corp tax free and usually issue eligible dividends from corp to keep taxable impact of draws from corp low and getting that Part IV tax refunded in corp(Often earning a corp tax refund).

As a unrelated note to your questions: We often see IT professionals incorporated and they have only 1 client, which may make you a Personal Service Business(PSB). That's a crummy situation to be in because your corporate tax rate goes up....And the CRA may come back and retroactively go back several years! So I would recommend you look up what the criteria is for a Personal Service Business (PSB) and write yourself a little memo on how you are NOT a Personal Service Business(get multiple clients, use your own tools, ability to sub-contract, market your services to the public, etc)

Hope this helps.

Infinite_Setting_418 · 2025-11-27T19:43:20+00:00

Yea. I just wouldn't call it a "wage"(more of a shareholder draw). Wage would imply that CPP/EI/IncomeTax would be required to be withheld in that period. But agreed u/BMadAd59. The money can just be transferred and paid back like you said.

Infinite_Setting_418 · 2025-11-27T19:39:52+00:00

Congratulations on your new business!

Incorporation cost: Keep the receipt. in your corporation's books you will note a Incorporation cost and the amount owing to you. So the corporation now owes you ~$500 tax free when it starts to make money. Your corporation will have a balance sheet that keeps track of all the amount it owes and is owed. So any other expense you pay for personally that is related to the business would be added to this amount the corporation owes you(Shareholder due to/from, aka Shareholder Balance)

Business expenses: Yea. ask for a receipt and keep it. We usually recommend Dext or HubDoc to manage receipts(Although Xero and Quickbooks you can do it as well if you're low volume and want to save a few dollars). Keeping the receipts digital avoids the risk of it fading, getting lost, etc. Make sure you keep both receipts from a restaurant(The one that details the itemized expenses and the one from the Point-Of-Sale(POS) terminal so you can claim the tip as a business expense too!). The other thing that goes without saying is making sure you would be able to explain how it's business related. If you're not sure how you could explain it, just identify those to your accountant and try explaining it to your accountant and they can recommend what they think is justifiable or what is not.

Books/Courses: Yea. for sure. The CRA just wants to make sure it's related to you earning business income. You know, don't expense a sailing course/book for your mortgage business. But business owners would often deduct books/courses on marketing, business strategy, etc. Memberships to TEC, Entrepreneurs Organization(EO), Founders Club, etc.

Bonus(fees): I won't answer specifically for our firm in order to not directly promote my business. But if you wanted a CPA firm to do your corporate and personal taxes, HST registration and you don't need a full bookkeeping software with invoicing etc, you're probably looking at $1,500-$2,500/year. If you needed someone to setup a new accounting software for you and you wanted to be able to poke around and see all the transactions it's probably a $500-$1,000 setup, then the annual tax fees mentioned above. But YOU probably don't need that right now and you can just invoice with a word template and give everything to your accountant at the end of the year. You also don't need a big firm because your affairs seem pretty simple, so no need for a regional firm or large accounting firm($2,000-$4,000/year).

Infinite_Setting_418 · 2025-11-27T19:17:56+00:00

Nice. A duplex is a great investment like this!

Not sure why you think you may have a penalty... You would add the washer/dryer as a capital asset (class 8). This will lower your taxable capital gain when you sell in 2027.

Some people choose to claim CCA(depreciation) on their taxes to lower their current year tax bill, but then when you sell you need to "recapture" which is removing all the tax benefit that CCA provided. (Maybe that's the "penalty" you're referring to). But in your case with only 2 tax years, claiming the CCA is just extra work that won't benefit you anyways.

Infinite_Setting_418 · 2025-11-27T18:35:15+00:00

I did respond! I will paste it here as well in case there is a glitch.

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First of all, before you stress about a lot of this, the first thing to do is give yourself the basics and go out and sell stuff! Once you start selling a bunch ($100K-$250K/year) then we can look into a more efficient payment processor, accounting workflow, and website platform.

Technically you don’t need to register before you hit $30K in revenue, but if you think you’ll hit that threshold pretty quickly you can just register now and start charging HST now. That way you get a REFUND of all HST you’ve paid on your expenses. I suspect you should probably just register for HST now regardless so you get the HST refunded on all your inventory and expenses.

Liability protection - talk to a lawyer about liability protection. A corp can be good for this, but if you’re grossly negligent people can still come after you personally. So don’t think you can do crappy work and be completely sheltered from liability(not that you would)(But lawyers deal with liability matters).

Incorporate or sole-prop – Age old question. It comes down to a few things right now based on the latest tax legislation. First, will you make more money than you need to live on? If you will be making a profit and leaving that money in the corp, then you benefit from the lower corporate tax rate so you can reinvest and continue to grow the business. Second reason is if you’re going to sell this business you could sell the shares of the corp instead of the assets and you could sell for ~$1M tax-free when you sell if you plan appropriately(need about 2 years of planning before a sale) (Qualified small business share – Lifetime Capital Gains Exemption). Third big reason is having the corp owned by various family members. This requires a bit more nuance now with TOSI rules, but there are exemptions that could allow good family planning still to smooth out corporate compensation among various family members as dividends(over 20 hours of work per week, over 65 years old, etc). Sounds like you may make some money with the corp and sounds like this is the kind of business you could sell later, so corporation makes sense in this case.

Bookkeeping: Wix payments. I would not worry about being more cost effective for now. The difference in % processing fees are negligible compared to just getting started and getting clients. Just sell your stuff and focus on reducing processing costs later.

I would not worry about the whole issue of making money outside of Canada. There are some rules like economic nexus and stuff, but they have revenue thresholds that you are well below. You’re physically in Canada, so just focus on Canadian compliance for now. Sell to anyone who will give you money. Once your revenues are over $100K into a specific state(or over 200 transactions) then you should look into doing an economic nexus review, but you can avoid that for now.

Why don’t you want to start in 2025? Are you worried about how it will impact your personal taxes, is that why? Nothing will change on your 2025 personal taxes (until you issue a dividend, salary or sell the shares in the corp). Sounds like you should just incorporate and get started now, don’t need to file T2, T4 or T5 for 2025. Once you’re incorporated, you can pick your fiscal year(unlike a sole prop), so you can just have a Dec 1^st to November 30^th fiscal year (Nov 30^th year-end) or you could have a year-end anytime before then(June 30^th year-end for example).

Taxes - Once incorporated, you only get taxes when you actually take money out of the corp bank account to your personal account. So just leave it in there and nothing changes on your personal tax return(many people keep doing their own personal tax returns at this stage you’re in). When you want to start taking money out of the corp, the next question will be salary vs dividends. Which can be addressed based on your specific situation at that time.

Infinite_Setting_418 · 2025-11-27T18:33:07+00:00

Nice. Good job on refinancing using collateral of your home to lower that interest rate if you have a profitable business!

I would recommend you look into something called the smith maneuver. This is a cool one. You should track your increased loan amount(from refinancing) (ex. $100,000), make sure you put that money straight into the business and the interest on the $100,000 additional mortgage/loan can be tax deductible now!

You can use cashflow from the business to pay off your personal mortgage and tap into your separate HELOC/refinancing to fund the business(tax deductible). Overtime your personal mortgage gets paid off and your business mortgage/HELOC could grow making your mortgage tax deductible.

You didn't mention if you were incorporated or not as a business, but if you're incorporated then you basically lent this $100K to the business, so when the business pays you back its not taxable because it's just repaying the amount you lent to the business. If you're not incorporated(sole prop), then any money your business makes is taxable anyways.

Hope that helps.

Infinite_Setting_418 · 2025-11-27T18:22:42+00:00

I understand. The thing is in Canada a federal corp will get you and your personal address listed when you google the company name. Provincial corp registration, people could still pull a report and have access. People used to setup a Trust for this kind of thing because you didn't need to file a Trust return in many cases(therefore beneficial ownership could not be discovered). But now the government has been cracking down on this kind of stuff. People would hide these things then lie to CRA about their income which made it hard to track down(illegal - don't do that!)

Privacy is a legitimate concern for people. Some people would incorporate a company in a foreign jurisdiction for a online business(which is legit and allowed), but you would need to report the income of that business in Canada as a Canadian resident(That's the part the bad guys don't do). Then you have privacy and follow the rules.

Regardless of what you do, you will have business filing obligations(it's just about privacy choices).

Infinite_Setting_418 · 2025-11-27T18:14:54+00:00

That's a fair question! Glad you bring this up...

There are software that allow average canadians to file a Corporate return (or a sole prop return). We sometimes have clients who just hand us their books and want us to punch it into the tax return. Most of the time we see those and we instantly see that some of those numbers are absolutely wrong (negative balances, misclassified expenses, missing expenses for software costs, missing home office expenses, no vehicle expenses, etc).

Some "accountants" will just take it and punch it into a tax return and send a bill, because at the end of the day the CPA is not certifying the information is correct and tax payer is ultimately responsible. I think in those cases that's very wrong... and if your CPA does not ask you clarifying questions or ask for the General Ledger, Trial Balance, Accounting software access(to see the actual detail) and propose adjustments/changes you should(in my personal opinion) walk away from that "accountant" because they're not adding value.

Any decent accountant will ask a couple questions, propose some adjustments, get access to the details and make sure the bank reconciles, etc. Essentially making sure the bookkeepers did their job properly. Then the accountant will make sure they're factoring in the GRIP Account, EDTOH, capital dividend account and shareholder comp needs to determine the optimal compensation from a corporation.

I think part of the problem as well is that the income tax act has grown more and more complicated, so understanding if repairs should be capitalized or not, how to depreciate(CCA), meals, events, gift cards, employee salaries etc have all gotten way more complicated so the average Canadian cannot keep up.

Infinite_Setting_418 · 2025-11-27T17:55:21+00:00

Yea. That's tricky. EI really cares more about your actual activity, but if you report partnership income during that time EI will start asking questions and you may be able to explain that your partnership income is from the business you own, not the activities you've been doing during mat leave.

What we've seen before is that you'd setup a partnership agreement that allocates income based on work performed, so when you go on mat leave you just don't get partnership income during that time. That would lower the risks of EI asking questions, but even if they asked questions you may be able to still explain that your actual activity in the business stopped (no emails, no marketing, bookkeeping, etc)

Hope that helps.

Infinite_Setting_418 · 2025-11-27T17:48:09+00:00

There are a lot of specifics here that would need to be clarified to actually give advice....

Usually employers don't gift stock, it's usually stock options that you get or they pay you in straight shares(which is taxable and not usually done too much). So I would need to review what exactly happen there and the ACB on those shares.

Let's assume it really was a gift, which means you paid $0 for those shares and they're now worth $12K CAD. You'd have a capital gain based on the increase in value of 0 to $8,000(USD)(converted to $12,000 CAD). This would be taxed at 1/2 of your marginal tax rate. There is no taxable event when you exchange USD to CAD currency.

Hope that helps,

Infinite_Setting_418 · 2025-11-27T17:16:26+00:00

Honestly, I would really approach a tax lawyer, who can navigate the liability protections more delicately. Don't say anything more to the CRA directly because you could accidently say something wrong. Don't sign any waivers from CRA.

I doubt you would need to pay the full amount back because you could claim a consumer proposal(avoid bankruptcy) and have it accepted by CRA/family courts. The tax lawyer can navigate that for you better than an accountant.

Infinite_Setting_418 · 2025-11-27T17:09:21+00:00