4 steps to assess dividends vs wage for sr&ed gain
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SR&ED funds can go direct to Investigators and does not interfere with other fund sources or have ethics issues. We have crafted strategies to maximize the dollars realized,minimize the effort of assembling claims and avoid unnecessary CRA headaches. It should also be realized that SR&ED claims will interact with both corporate and personal taxes. Clients care about their after-tax position, as well as cash flow, retirement needs and estate planning. Annual SR&ED rebates can be significant, but need to harmonize with other strategies to give the greatest benefit. Goulet Associates strives to supply one piece of the larger puzzle.
![4 Steps To Assess Dividends vs Wage For SR&ED Gain
The following 4 steps illustrate the advantage of switching dividends to increase wage in professional
corporations where the owner spends a significant amount of time in research. * The goal is to deliver to the
individual and the Professional Corporation a positive gain in combined after tax position.
Professional Corporation Tax
Keep total distributions equal but increase the wage and lower the dividend by $100K.
1. Switching $100K from dividends to wage increases the basis for SR&ED.
2. Increase in salary expense lowers the professional corp's taxable income.
3. SR&ED Investment Tax Credit value is added to the corp’s income. It is also used to offset Part IV taxes
payable. [In many cases the balance is refunded with a cheque in the mail.]
Personal Tax
The owner receives the same total amount, with more wage and less dividend than previously.
4. Personal income tax increases due to treatment of T4 wage vs Canadian dividend.
*The greater the time spent in research, the greater is the resulting SR&ED Investment Tax Credit.
The combined result for corporate and personal impacts is positive in most cases, depending on the portion of
time worked for the corp in research.
Maurice Goulet
October, 2013
Tel/Fax: 1.888.477.3373
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4 steps to assess dividends vs wage for sr&ed gain
- 1. 4 Steps To Assess Dividends vs Wage For SR&ED Gain The following 4 steps illustrate the advantage of switching dividends to increase wage in professional corporations where the owner spends a significant amount of time in research. * The goal is to deliver to the individual and the Professional Corporation a positive gain in combined after tax position. Professional Corporation Tax Keep total distributions equal but increase the wage and lower the dividend by $100K. 1. Switching $100K from dividends to wage increases the basis for SR&ED. 2. Increase in salary expense lowers the professional corp's taxable income. 3. SR&ED Investment Tax Credit value is added to the corp’s income. It is also used to offset Part IV taxes payable. [In many cases the balance is refunded with a cheque in the mail.] Personal Tax The owner receives the same total amount, with more wage and less dividend than previously. 4. Personal income tax increases due to treatment of T4 wage vs Canadian dividend. *The greater the time spent in research, the greater is the resulting SR&ED Investment Tax Credit. The combined result for corporate and personal impacts is positive in most cases, depending on the portion of time worked for the corp in research. Maurice Goulet October, 2013 Tel/Fax: 1.888.477.3373 GouletAssociates.com