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Paying yourself while being the owner of a business

Expert: Michael Fromstein

Tom asked:

I am the sole owner and employee of a federally incorporated renovation business in Ontario. I now want to pay myself periodically. Can I do so without source deductions and/or issuing myself a T4?

Michael Fromstein answered:

NO. Any employer paying any wages to any employee must withhold taxes and remit them and report those wages on a T4. As the sole shareholder, you will be exempt from Employment Insurance – but the corporation will be responsible for withholding and remitting CPP and income taxes.

The penalties get up to 20% of what you should have withheld and the interest clock never stops ticking. You only have to remit funds to the government when you are taking a salary – so you don't have to pay the government when you are not even paying yourself.

About the author

Michael Fromstein is a tax specialist with Integrated Professional Specialist Services.

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