If you are a small business owner or incorporated professional, protect yourself and your business from hefty tax rates through CPA4IT.
We provide expert consultation, bookkeeping and tax filing services to small businesses and independent professionals. As an independent consultant or small business owner, you need to be aware of the financial risks that present themselves if you could be considered a personal services business.
But what is a personal services corporation?
The general meaning of the term is an incorporated employee. This means that the individual or individual(s) providing services to a corporation could be reasonably regarded as an employee of the corporation, rather than a separate business. You are at risk for personal services corporation classification if you are an independent consultant with only one client (you are at extra risk if you are in contract has lasted for many years) and if your corporation has fewer than 5 full-time employees. To defend your revenue, it is in good measure to implement asset protection by keeping your financial assets in the name of a spouse or in a separate holding company.
Protect Yourself from Unnecessary Tax Risks
It is extremely important to protect yourself from being classified as a personal services corporation by the Canada Revenue Agency (CRA). This simple label evokes major tax costs onto your business. The benefits of filing your taxes as a small business add up to massive savings. But if you are at risk for being considered a personal services corporation by the CRA, you may find your business extremely taxed. Fortunately for our clients, at CPA4IT we have the knowledge and expertise to ensure that your business is taxed as a small business and not a personal service business.
Personal services corporations lose a number of financial benefits that small businesses receive. They are required to pay the full corporate tax rate, as opposed to the significantly lower small business rate. In addition, small businesses are able to deduct a number of operational expenses from their taxes, while personal services corporations may only deduct salary and wages.
If you file your corporate taxes as a small business and are found to be a personal services corporation, you will be subject to a large tax reassessment and penalties for following incorrect filing procedures. With CPA4IT you can be confident that your taxes will be filed correctly the first time.
If you find yourself in a tax audit situation with the CRA, we can help. We have a great track record of success; in 25 years we haven’t lost a single major CRA audit case!