Can my company declare a bonus to reduce taxes?
Allan Madan, CA
If your corporation has surplus profits for the year, then consider accruing a bonus payable to you or your family members. The bonus does not have to be paid at the end of the year, but simply recorded as a liability. Your corporation will receive a tax deduction for the amount of the bonus accrued.
The CRA requires bonuses to be paid within 180 days of your corporation’s year-end. If it’s not paid out within that time frame, then the bonus expense is non deductible to your corporation.
If your company’s year end is after June 30, it’s very advantageous to accrue a bonus at year-end. This is because the unpaid bonus can be deducted by your company in the current year, but does not have to be included in your personal income until the following year.
Disclaimer
The information provided on this page is intended to provide general information. The information does not take into account your personal situation and is not intended to be used without consultation from accounting and financial professionals. Allan Madan and Madan Chartered Accountant will not be held liable for any problems that arise from the usage of the information provided on this page.
ABOUT THE AUTHOR
ALLAN MADAN
CA.CPA.CGA
Allan Madan is a CPA, CA and the founder of Madan Chartered Accountant Professional Corporation. Allan provides valuable tax planning, accounting and income tax preparation services in the Greater Toronto Area.
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