Tax Tip Thursday

This show is specifically for people who own corporations.

I often get this question.

Should I pay myself as an employee (T4) or as a shareholder (T5)?

There are advantages and disadvantages

Here are the basic differences between them.

I highly recommend that you work through this with an accountant or financial planner.

While the basics are straight forward, they can affect other aspects of your financial situation both short term and long term.

You can take a regular paycheque (T4).

The downside (or maybe upside) is that the corp HAS to deduct income tax and cpp and remit it by the 15th of each following month when you take it.
It will be a deduction in your corporation and save you 12% tax.
It will be added to your personal tax return for the 2025 tax year (April 2026 filing), but most of the tax should be paid already.

OR

You can take dividends.

The downside (or maybe upside) is that you DO NOT have to deduct income tax and CPP, but you will owe the taxes when you file your personal tax return in April 2026.
It will NOT be a deduction to your corporation.
Personally, you need to set the tax amount aside for your own sanity so that you have it when it is due (April 2026).
Another downside (or maybe upside) is that you can NOT contribute to CPP. That is of course good in that you do not have to pay it, but you are not contributing to it either.
It also does not create RRSP room either.

Be sure to talk to your accountant about it before making a decision on your own.

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Disclaimer:

This article provides information of a general nature only. It is only current at the posting date. It is not updated and it may no longer be current. It does not provide legal or tax advice nor can it or should it be relied upon. All tax situations are specific to each individual. If you have specific tax questions you should book an appointment for a 1 on 1 consultation.