small business taxes - Calgarypuck Forums - The Unofficial Calgary Flames Fan Community

moncton golden flames · 09-15-2009, 11:55 AM

i work for a small residential design company. we have the boss and 2 draftsmen, only 3 people in the company. work around here has been slow and the boss has told us that the company bank account is running low. he also claims it is running that low because he has to pay the government the equivalent of our income in taxes. so essentially, he is saying that he pays the feds a 100% tax rate on his employees.

i'm no rocket scientist nor a math genius, but i know he is lying to us. does anybody know what kind of taxes are realistic for such a small company?

ps: i have my own company that design homes, see 'residential drafting & design' in the power ring section.

Sliver · 09-15-2009, 11:59 AM

I know for sure he has to match what you pay for CPP and he would also pay 1.4x what you pay for EI.

Locke · 09-15-2009, 12:08 PM

If he is 'matching' your income tax payroll deductions then hes either lying or legitimately ######ed.

However, if he is matching your income tax payroll deductions then you get that money back on your tax return as a tax overpayment. It would go into a CRA tax account tagged to your SIN number, so it would be your money at tax time.

He has to match CPP and 1.4x EI though, thats legit.

moncton golden flames · 09-15-2009, 12:18 PM

does he have to pay anything on our income tax?

Locke · 09-15-2009, 12:23 PM

Quote:

Originally Posted by moncton golden flames

does he have to pay anything on our income tax?

No, he just withholds it from your pay and remits it to the CRA, depending on whether he does it or pays an accounting/payroll company to do it for him.

Taxes come straight off your cheque, its your money thats being remitted to the CRA, the company doesnt have any responsibility with regards to Income Tax other than to withhold and remit.

That said, it has happened when small companies have made the mistake of matching the Income Tax withholdings, but thats a lot of money in the long run and should generally be considered as preposterously stupid.

Ie, for argument's sake, if you were employed for $100K, and $30K was withheld as income tax, for the company to match that $30K they'd essentially be paying you $130K a year. No one can be that stupid.

moncton golden flames · 09-15-2009, 12:40 PM

ok, i get it now. all he is doing is witholding our portion of income that we owe to the feds. the only thing he pays for on top of our salary is the .4x of ei payments. all of this money is mine and he is paying it to the cra.

he has been making it sound as if he has been required to pay more than our wage equivalent to the feds. he has recently been very open about telling us why money is tight, i suspect he either explains it wrong to us, or is completely lying. sad thing is i don't trust him. if my job market wasn't so small i'd be working for somebody else very soon.

moncton golden flames · 09-15-2009, 12:40 PM

thanks for the help mr president.

Bill Bumface · 09-15-2009, 04:53 PM

What were your revenues last year?

Even if you're having a garbage year he'll have to be paying the taxes in installments (which will give him a giant refund if revenues dropped a lot, but leave the company broke in the meantime).

Sliver · 09-15-2009, 08:00 PM

Quote:

Originally Posted by hulkrogan

What were your revenues last year?

Even if you're having a garbage year he'll have to be paying the taxes in installments (which will give him a giant refund if revenues dropped a lot, but leave the company broke in the meantime).

Unlikely. I would think his retained earnings would be low or basically break even. That's how my accountant works it anyway. If the company had good profits they should be taken out by the owners and let the owners (and maybe their holding companies) shoulder the tax burden and reap the benefits of the net earnings as well.

I'm no expert, but that's how I work it with my company. This year for us has been worse than last year but my operating company doesn't have to pay tax instalments. My holding company does and they are too high compared to my actual income this year as they are based on last year's earnings so I will get a refund, but again that has no bearing on the operating company or my employees.

Locke · 09-15-2009, 10:10 PM

Quote:

Originally Posted by hulkrogan

What were your revenues last year?

Even if you're having a garbage year he'll have to be paying the taxes in installments (which will give him a giant refund if revenues dropped a lot, but leave the company broke in the meantime).

Yeah, thats really dependent on the actual revenue stream and the final numbers as well as past trends, typically smaller businesses dont pay installments because it cripple's its cash flow.

Julio · 09-15-2009, 10:30 PM

Quote:

Originally Posted by moncton golden flames

ok, i get it now. all he is doing is witholding our portion of income that we owe to the feds. the only thing he pays for on top of our salary is the .4x of ei payments. all of this money is mine and he is paying it to the cra.

Not quite...
If you pay $100 in CPP he also has to put in an additional $100.
If you pay $100 in EI he has to put in an additional $140.

But it's nowhere near to 100% of what your pay is...