CRA My Business Payments - Online banking

Here are the instructions on how to proceed.

1. Sign in to your financial institution’s online banking account.

2. Navigate to the ‘Tax Filing Services’ and select.

a. If this is your first time using this service, select Register, and enter your name and phone number.

b. Verify your business bank account(s), and continue.

3. Select ‘Add Payment Type’ and select the tax payment type you’re making:

a. Federal – Corporation Tax Payments – TXBL (balance owing) or TXINS (to set an instalment payment).

b. Federal – GST/HST Payment, etc.

4. Enter your 15 digit CRA business number (9 digits followed by the program account reference number - e.g. RC000X Corporate Income Tax, RT000X GST/HST, RP000X Payroll deductions).

5. Select the Pay option and which account you would like the payment to come out of.

6. Fill in the Period ending, Payment amount, and Payment date.

7. Verify all of the information for accuracy and submit.

8. You will have the option to print a receipt, or alternatively, you can use the other features such as ‘View/Cancel future transactions’ to show the pending payment or the History tab to view any transactions from the Tax Filing Services.

Participating financial institutions:

● ATB Financial

● Bank of America

● BMO

● Canadian Western Bank

● CIBC

● Citibank

● Desjardins

● J.P. Morgan

● KEB Canada

● Laurentian Bank

● Meridian Credit Union

● National Bank

● RBC Royal Bank

● Scotiabank

● TD Canada Trust -

● Alberta Credit Union

● Atlantic Canada Credit Unions

Incorporation of a locum practice

Originally published in OVMA Focus Magazine Jan/Feb 2023

I recently spoke with a veterinarian who had graduated a few years ago—let’s call him Steve. Steve started working as a locum three days a week in 2022, so he could spend more time with his newborn. Steve’s partner works for a major bank, and their salary was more than enough to fund the couple’s household expenses such as car and mortgage payments, groceries, and utilities. Steve loves working as a veterinarian, and he wanted to know more about what incorporating would mean for him as a locum or associate veterinarian. He admitted to having no idea about how to run a business. 

 We discussed how veterinarians could incorporate, provided their corporations meet several criteria established by the College of Veterinarians of Ontario (CVO). These corporations are called Veterinary Medicine Professional Corporations (VMPC). They are separate, legal entities that “sit” between the veterinarian and the practice they’re working for, either as a locum or associate. There are different billing arrangements—some VMPCs charge an hourly fee for their principal veterinarian’s time, others charge a percentage of the fees that their principal veterinarian produces.

 VMPCs have a business bank account and business credit card. All revenues are deposited to the VMPC bank account and expenses are paid out of the VMPC bank account or with the credit card. The VMPC pays all professional expenses for the principal veterinarian. 

 With the profits earned (fees billed, less expenses paid), the VMPC then pays the principal veterinarian with either a dividend or a salary. This is where Steve and I really spent some time understanding his personal situation. He shared that their hopes were to have one more child, and that he was hoping to take 15 months of parental leave, since he felt like he missed out on that time with their first child. Steve had questions about whether he should opt in to contributing to employment insurance as a self-employed veterinarian, whether a salary would be better than dividends, and if a corporation made sense. 

We discussed how dividends are paid from the corporation’s after-tax profit, and Steve would be entitled to a tax credit that approximates the amount of tax that was paid by the corporation, so that there’s no income tax difference between being paid a salary or a dividend. 

 There are several critical differences between salaries and dividends that factored into Steve’s decision making: 

• Dividends aren’t subject to Canada Pension Plan (CPP) contributions, resulting in a savings of $7,402 for 2023, but there’s no eligibility for the CPP in retirement. 

• Each $100 of salary generates $18 of RRSP contribution room ($171,000 of salary in 2023 creates $30,780 of RRSP contribution room), while dividends don’t generate any RRSP contribution room. 

• Some disability insurance plans don’t insure dividend income. 

• In certain cases, banks won’t consider dividend income when business owners apply for mortgages or loans. 

Steve is a quick learner and caught on that the main benefit of incorporating is the ability to defer the personal taxes on any income that you can leave in the company. Corporations pay tax at a rate of 12.2 per cent in 2023 in Ontario, compared to individual tax rates that are as high as 53.53 per cent in 2023 in Ontario. This creates an opportunity for tax deferral where a veterinarian doesn’t need all their income to fund their lifestyle. Any income that’s not drawn from the corporation as a salary or dividend will only be subject to the corporate rate of tax, deferring any personal level of tax until the corporation pays those funds out to the veterinarian shareholder.

The corporation can invest these funds in public company shares, mutual funds, exchange-traded funds, real estate, private investments, or even Bitcoin. Steve joked that Bitcoin might be too risky for them, but the couple have been on the lookout for their first duplex rental property, and that investing in that duplex through a corporation would allow them to invest sooner, since they wouldn’t have to pay personal tax on their down payment.

One of his partner’s biggest questions was about the cost. They are currently paying $750 a year for their personal tax returns, which includes Steve’s self-employment in- come. This is a standard rate. I told them it would be more expensive, as it typically costs about $3,000 in legal and accounting fees to establish a professional corporation and register it with CVO. On an annual basis, they’ll need to prepare financial statements and a corporate tax return and update the company’s minute book. This will cost $4,000 to $5,000 per year. 

 In the end, the couple decided that incorporating made sense. Being able to leave excess funds in the corporation and use the corporation to smooth Steve’s income out over his parental leave when he’s off with their next child suited their financial plans. From their perspective, the CPP savings outweighed the cost of setting up and maintaining the corporation, and they liked that they had the infrastructure set up to save corporately and start to build their real estate portfolio. 

Reprinted from the Ontario Veterinary Medical Association’s Focus magazine www.ovma.org

Can I write that off?

An overview of deductions and financial hygiene

Originally published in OVMA Focus Magazine March/April 2023

I was talking to one of my favourite clients last week—let’s call her Angie. Her veterinary practice is growing and she’s getting a new car. It’s a model that she’s always wanted, and I’m happy for her!

Angie is one of my more “ambitious” clients when it comes to deciding what is and isn’t a business expense, and I knew the question was coming. She wanted to know if she could write off her new car as a business expense. The short answer is maybe.

People casually throw around the idea of writing off things. Generally, this means claiming them as a business expense to offset your income, reduce the income tax you must pay, and possibly even get a credit back for the HST that you paid on the purchase. Depending on your corporate income and marginal personal tax rate, this could equate to more than a 50 per cent savings on the after-tax cost of that expense. It’s also known as a deduction.

To be a legitimate business expense, the expense needs to be incurred in the process of attracting or earning business income. For a vet clinic, it could be:

• Rent for your office.

• Pharmaceuticals that you administer or sell.

• Insurance.

• Consumables such as gloves.

• Electricity and heat for your practice.

• Wages for your staff and locum support.

• Repairs and maintenance for your practice’s assets.

For a locum veterinarian, the list is shorter, but there are still several legitimate expenses:

• Insurance.

• College of Veterinarian of Ontario dues.

• Scrubs.

• Professional development and memberships.

• Supplies the locum provides.

• Meals with prospective clients.

• Cell phone (a reasonable proportion for business use).

There will always be some people looking to push the envelope. Here are some of my favourite overly ambitious write-off attempts:

• Deep sea fishing trip in the Gulf of Alaska.

• A horse trailer (for a small animal practice).

• Dirt bike repairs.

• A new Seadoo.

• Mercedes G63 AMG lease payments.

• Daycare for the practice owner’s children.

• Lululemon shopping spree for the practice owner.

I generally advise clients like Angie to not take unreasonable risks. There’s no real defense if a Canadian Revenue Agency auditor asks you about that Seadoo you bought for “business purposes.” It’s better to remember all the legitimate deductions and make sure that you track them properly, rather than trying to squeeze in a few extra illegitimate ones.

Here are two expenses that are frequently forgotten that I’d like to highlight—make sure that you’re claiming them on your tax return if they apply to you:

1.  MILEAGE EXPENSE

If you’re not a large animal veterinarian, or working in a mobile practice, you probably aren’t spending a significant amount of time travelling for your practice, but there’s likely still a component of your monthly driving that relates to running your practice.

Driving from your home to your practice location is considered a personal trip, but any travel from your practice to the bank, to the store to pick up supplies or to a restaurant to pick up lunch for your staff is considered a business expense.

While you probably don’t have a business vehicle, you can still capture this expense. Each year, Industry Canada sets a mileage rate for reimbursement, and you can reimburse yourself for the business use of your personal vehicle at this rate. For travel in 2022, the rate is 61 cents per kilometre for the first 5,000 km and 55 cents for additional kilometres after 5,000 km. For 2023, the rate is 68 cents per kilometre for the first 5,000 km and 62 cents for additional kilometres after 5,000 km. This rate is set to capture the fuel costs, repairs, maintenance and insurance for your vehicle, so they don’t need to be tracked separately. This is how Angie will be able to write off part of her new car.

2.  INTEREST EXPENSE

If you’ve just bought a practice, or maybe just bought the building your practice operates from, you may have used personal funds to pay for part of the purchase.

The interest on money borrowed from a line of credit, home equity line of credit, or even a mortgage refinancing that’s borrowed to fund an income producing asset (like a veterinary practice) can be claimed as a deduction on your personal income tax return, provided that the sole purpose of the funds was income earning.

Financial Hygiene

I refer to tracking expenses properly as financial hygiene. Knowing what expenses are deductible is only half the challenge; remembering to claim them is just as important. This is where financial hygiene comes into play.

I recommend that all business owners have a dedicated credit card for all business expenses and a business bank account where business revenues are deposited and any business expenses that you can’t pay with a credit card are paid from.

For locums, this will make it easy to summarize your income and expenses at year-end. Simply download the CSV file from your bank for each account, sort by description, total by description, and you have a great start—no need to add up receipts at the dinner table.

For practice owners, this will make your bookkeeping far easier, as you won’t be trying to stitch together expenses from your personal card, a couple of different bank accounts and a business credit card, while making sure that you’re claiming all the business expenses, but not mixing in any personal expenses. Mistakes happen. You’ll inevitably buy something for your practice with your personal credit card and you’ll probably accidentally buy groceries with your business credit card. If you track these irregular mistakes and let your bookkeeper know, it’s still much easier to have 99 per cent of your expenses handled properly.

My second recommendation is to set up a cloud document management system. The two that we use most frequently are Dext and Hubdoc. At their most basic levels, these two apps are cloud-based filing cabinets. When you upload a receipt, their systems extract the data on the receipt using optical character recognition and archive that receipt. This way you don’t need to keep boxes of receipts around, and you have access to the records if your accountant or the Canada Revenue Agency needs a copy.

In the end, we decided that Angie’s vehicle shouldn’t be claimed as a business expense. When we discussed the risks, she ultimately wasn’t comfortable. But we were able to discuss other aspects of her practice and make sure that she had the systems in place to capture her genuine expenses, archive the receipts, and make sure that we were claiming other fringe expenses that were legitimate in support of growing and maintaining her practice.

Reprinted from the Ontario Veterinary Medical Association’s Focus magazine www.ovma.org