My 2008 Personal Income Tax Results
March 27, 2009 Posted by Tyler CruzAs promised, here’s an update of how things went with my personal 2008 income taxes since my accountant finished all my personal year-end taxes last week. I say personal because I still have to gather some more documents to give to my accountant before he can start on my 2008 corporate taxes, but more on that later. However my new accountant really has key skills as accountant and also starting instilling some great habits in me…
If you remember, a couple weeks ago I posted how I Expected a $15,000 Tax Return from the Government. I have my completed return in front of me, and it ended up being even higher than we had quickly estimated. I should be receiving a cheque from the Canadian Revenue Agency within a week for a total of $16,846.56.
Even though I’ll still have to pay my 2008 corporate taxes, it’s still great to see a return since I wasn’t expecting it to be quite that much.
Saving Big Bucks with Car Expenses
I don’t know how it works in the States, but here in Canada, my corporation can write a cheque to me (the employee) for any business-related travelling by car based on the number of kilometres. It is tiered, but basically the corporation can pay $0.54 per KM for business related uses such as driving to see my accountant, going to the bank, or even driving somewhere to do a blog post (since that’s part of the corporation’s business).
As long as this is all documented, the corporation can then write me a cheque for the total amount of KM multiplied by $0.54 (it’s tiered after a certain amount) which is a write-off for the corporation, and the money is completely tax-free to me as an individual!
To document my business-related travel (since I obviously don’t use my car solely for business), I bought a basic small notepad from Staples for $2 and keep it in my car. Whenever I need to go somewhere that is business-related, I record the date, starting millage, ending millage, total millage for the trip, and destination/reason for trip. This is what my accountant suggested I do. The information to management account have been moved here to help you understand why it is important.
It’s amazing how much you can write off by doing this. My first entry was when I drove to my accountant to sign my completed personal return for him to send off to the government. I recorded the trip on my odometer and it came to 9KM one way. Since I’d obviously have to drive back home, that adds on another 18KM. When you do the math of 18KM * $0.54 you get $9.72, which I can submit as an expense when I do my 2009 personal income tax.
I had not recorded anything in 2008, but to think that a simple drive to and from my accountant’s equates to a $10 cheque from my corporation – tax free (and a write-off for my corporation), I’m just happy that my accountant told me about this now and encouraged me to start recording my trips.
When you factor in gas expenses, maintenance, etc. your tax write-off’s for simply driving your car can really add up.
Corporate Taxes
As I stated in my post a couple weeks ago:
“Since this is the first year we’re doing my corporate taxes, we had to pick out a fiscal year for it. We (he… haha) decided that running it from March 1st – February 28th made the most sense. Since I had prepared my corporate taxes for the calendar year of 2008, it means that I have to go through everything again to prepare the data from the first couple months of 2009 since that is now part of the fiscal year for the corporation. This will be a bit of a pain, but it made the most financial sense.”
I really, really hate preparing all of my stuff for my income taxes. In fact, I’m not sure there is anything I dread more. It wouldn’t be so bad, except I have an incredible number of various revenue and expense sources, and since nearly all of them are online, the documentation for them is not always the easiest to gather.
I’ve already been procrastinating long enough so I hope to just down a couple Red Bull’s and get it done either tonight or by tomorrow. I do only have to gather everything from January 1st, 2009 to February 28th, 2009 so it could be worse, but it will still take me a few hours at least.
I’ll be so happy once I’ve finally tackled this beast and give to my accountant so that I can get some closure on this until next year.
Payroll – Let the Headaches Begin
For 2008 (fiscal year), I just had the corporation write myself a cheque whenever I needed money. While this way is certainly acceptable, and in fact many (if not most) corporations with only 1 employee function this way, it’s actually not ideal for a few reasons I won’t bother mentioning here.
Even though I wanted to continue with this completely stress-free method, my accountant really pushed me to set the corporation up on a payroll, and while I was very reluctant at first, it does seem to be the wisest choice of action for the long run and it allowed me to learn about the parts of a paystub.
Two nice benefits about setting up a payroll is that:
- I’ll never have to pay quarterly in advance anymore with my personal income taxes. My year-end taxes will be much simpler to do since I’ll have a traditional T4 slip which also means that I should get a small return each year as well.
- The corporation will be all set up and ready to go if I ever hire an employee or two. I already read this informative blog post about workers comp.
The two main downsides to setting up the payroll, and the ones I’m certainly not looking forward to are:
- Setting it up. First, I’ll have to get through the arduous task of getting through to a person on the Canadian Revenue Agency phone and setting my corporation up on a payroll. They will then send me some files through the mail which I’ll have to complete which should be mind-numbingly fun. Currently, I made the best decision to go with sap successfactors implementation partners for my HR needs.
- The corporation will have to pay myself monthly (paying myself twice a month would just be added work and pointless) which means that I’ll have to do some accounting and mail out some forms and crap each month to the Canadian Revenue Agency; or I might just seek help from EWM. They have professionals who can go about the accounting process far more easily than I can.
I guess once I have it set up and and begin to get used to the process for a few months it won’t be so bad and I’ll start to get used to it, but I’m really not looking forward to setting it up.
Does anyone have any experience setting up a payroll through a corporation with the Canadian Revenue Agency? Is it as bad as I think it will be?
Anyhow, that’s an update on my taxes. I’ll let you guys know when my 2008 corporate taxes are done and how much it owes.
Have you finished your 2008 income taxes yet?
45 Responses to “My 2008 Personal Income Tax Results”
Congrats on the returns, my tax filing is done, went smooth this year 🙂
Dude, just call Ceridian and do your Payroll through them.
You DO NOT want to be calculating all the payroll jazz yourself. There are dozens of calculations that need to be done and different agencies that need to receive money, such as for example CPP and EI and Workers Comp etc.
Some of these may not be relevant if you’re the only employee, but eventually you might want to hire your girlfriend or a part time assistant, or whoever.
I wouldn’t even dream of trying to do my own payroll without using a company like Ceridian.
That would be a nightmare.
I have to agree with Paul, there are plenty of payroll services that take care of everything for you. Even some banks offer this service, and they take care of all the paperwork (paying the gouv each month, year end T4 etc).
Yes there are such companies but they take some big commission for that.
Good move setting up payroll, Tyler. Down here in the states it is easy to set up. Paychex handles all of my payroll and it’s something that ALL businesses (i.e. S-Corps, C-Corps, etc.) should do from the jump.
good stuff Tyler. I’m heading to my accountant Saturday and expecting similar numbers, only with a negative sign! lol
I agree with the rest of the comments that you should get on a payroll service. It will save you teh headaches and any risk of calculation errors. A few of my friends use various services and are happy with them.
Best of luck on the Corp taxes!
Tyler,
THink about outsourcing all that stuff to a pro like ADP. They’re the biggest payroll company in the US, and they will literally set everyting up for you at a small monthly fee. You outsource graphics, coding, design etc., why not tax stuff?
I’ve used ADP through various businesses for 12-15 years and it’s really a piece of cake. Now, you being the only employee will make it seem a bit costly, but start to add up the time YOU save by not doing it and you’ll quickly see that paying them $50-70/mo to do work that you’d spend at least a couple of hours doing each month is the way to go.
They cut your checks, figure your taxes, remit your taxes, legal paperwork etc, and at the end of the year simply take their docs to your accountant and it’s 1, 2, 3 easy as pie.
Here’s their Canadian site, check em out:
http://www.adp.ca/ (not an affiliate link -lol)
Good luck, and thanks for sharing!~
I’ll certainly ask my accountant about “outsourcing” my payroll stuff. He did tell me it was quite easy to do myself though, and that he’d create an Excel sheet with all the necessary formulas for me so that all I’d have to was enter how much I wanted to get paid and then it would spit out all the numbers and I could enter it onto the payroll sheet I would have to submit to the CRA each month.
But I _do_ prefer to offload any work I can if it’s fairly affordable so I’ll ask him about this. I wonder if he is even able or willing to do this.
I should mention, though, that we planned for me to get paid different paycheques so I’m wondering if getting a 3rd-party to do this would still work that way. I like the freedom of being able to pay myself whatever amount I want each month. It’s not a lack of planning, but there are times when I’ll need a bunch of extra cash such as for an upcoming trip, and instead of having to wait and save, I’d just pay myself a higher paycheck that month. Do you guys know if this is something I could manage with these 3rd-company paycheck handlers?
Ceridian can handle a company with 40,000 employees with each employee getting a totally different cheque. 🙂 I’m sure they can handle anything you can throw at them.
There is a charge to run each payroll, obviously, but you can make your paycheque anything you want.
Another thing you can do is write yourself a cheque from the corp., and then when you do payroll you let them know you did that.
So for example, lets say you normally pay yourself $5,000 every month. Lets say that during the month, you write yourself a cheque for $2,000 before payroll. You can then tell Ceridian to “Please pay me $5,000 Gross, but deduct $2,000 from my net because I took an advance.”
They can do stuff like that.
-Paul
I’m meeting with my accountant in a few hours. I finished gathering all my corporate documents late last night and will drop them off and also ask him about having my payroll managed by a 3rd party.
So Tyler, are you going to get that Hummer now? 🙂
I need to start managing my expenses this year…maybe you could write a whole post directly at how to prepare 🙂
-Mike
I doubt Tyler is going to get a Hummer, and plus… if Tyler was looking to buy a car in that price range, I doubt he would go with a hummer 😛
I personally think a Hummer would be pretty sick for Tyler to drive :-D. Although it’d be expensive on the gas. He probably would go for a different car, but a Hummer would be pretty cool.
to start to manage your expenses, the best way is to setup a budget and keep track of every expense at least monthly if not weekly.
I have setup an excel spreadsheet to track my personal expenses and track monthly. This really helps me to understand my cash inflows and outflows.
As a commercial banker, I see so many companies that don’t track expenses and this can lead to dissasterous circumstances. All I can say is, tracking expenses will help you have more cash because it makes you more aware. I am working on a website to actually help small businesses with tracking expenses and creating cashflows.
so why is your site a PR2?
I’m going through the same process right now. Registering with the CRA and all is no biggie, but once you start receiving all the paperwork to fill and the guides that come with them, the idea of using a payroll service will look very attractive!
I plan on doing it myself for at least a couple of months, because I like to understand the details of these sort of things, but after that, I’ll probably do as Paul suggested.
That is amazing! Driving to the bank, basically, will get you $10. Congrats on everything, I wish my tax return was that high.
If i could that much tax return i can throw a party yippieeee…
Thanks for nice information!
Tyler,
Have you thought about just paying your self the same amount every month? Then the paper work should practically be the same every month and not very much changes would need to be made? It might make things easier?
Hey Tyler,
Nice post on the taxes I will be doing the same thing next year as I will be incorporating. But I wanted to shed light on one of your sites that you should pay closer attention to.
http://www.gymnasticsforums.com/
I think you should clean it up 🙂
Haha, yeah I plan to clean that up sometime. But since it’s never been an active site and doesn’t bring in any revenue it’s not high on my priority list right now 🙂
Ugh, the worst time of the year. Payrolls are easy to set up in the US though. Anyway, nice job on the article.
That’s a pretty nice return on your taxes. I do think payrolls might work out pretty well for you because of the benefits you listed. Plus from the amount of success you seem to have, I wouldn’t be surprised if you ever do end up hiring a couple people at some point, so having the payroll set up would work pretty well.
Ahh, tax time…..a pain in the arse! At least you had a good outcome, with $$ back.
[…] Tyler Cruz – My 2008 Personal Income Tax Results […]
Nice to hear that their returning such an amount/ And by the way, I don’t remember very well but your site had a better PR and way better Alexa Ranking last time I checked. What’s the matter?
Nothing is the matter… if PR or Alexa actually meant anything then maybe it would 🙂
I have a site that is PR0 but brings in $50K+ a year and is #1 on SERPS for premium keywords… PR became pretty useless about a year and a half ago…
Im glad another internet entrepreneur agrees. PR is useless!
I think I know what website you are talking about, thats pretty awesome that its able to be your #1 site, even with the PR 0 🙂
great information about Income Tax Results
Congrats on the great tax year. I had a good one too! Canada seems to have an interesting and complex tax system…much like the us. Glad to navigate it well!
Best,
Brandon
Doing a payroll all by yourself is such a pain in the neck!
The opportunities for tax writeoffs are amazing. While it will be a bit of a hassle to track your driving expenses for work, the amount of money it will save you on your taxes next year is amazing. That’s a great tip and I’m sure you’ll appreciate the extra funds.
Great post!
Interesting about tax reduction, I think where I live all taxes are same scenario, first thing you must know what kind of income, assets, etc to calculate your corporate value, otherwise you’ll end up in negative cashflow, instead your thinking positive.
I hope Tyler will get overall satisfaction with well-done work and bless his beloved taxes for they bring more money next year.
I hope Tyler will get overall satisfaction with well-done work and bless his beloved taxes for they bring more money next year.
I’m surprised you’re taking care of it all by yourself. I mean there’s so many companies that will do all that for yourself. It’s so cheap that you’re better off paying them and spending your time working than doing it yourself.
That’s a great return you received.
Good luck setting up your payroll – you’ll feel pretty relieved once it’s all done
..impressive sum!
great tax returns….hope that was easy…huge amount.
[…] 2009 Posted by Tyler Cruz Paid Advertisement A few months ago I published a post titled My 2008 Personal Income Tax Results, and in it I mentioned how I was going to set payroll up with my corporation to pay my personal […]
All the small tiny bits add up to something big in the end.
Payroll processing can be confusing and difficult to do if you arent an expert, often it wouldnt hurt considering some other options.
thank you for sharing informative article with us.
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Thanks
Nice post.