What Business Deductions Are You Entitled to as an Employer?

Payroll business deductions

Every business that has employees knows that they have the tax responsibility of not only paying wages but making all of the other government required deductions.

You are required to hold back the portion of taxes owed on each employee’s wages, plus their CPP and EI contributions.

On your part you also have the employer’s share of the CPP and EI contributions.   The CRA releases this is an expense for the employer and as such can claim it as such along with the wages paid as an expense.

There may be other employee related expenses that you can claim as well.   If you pay premiums for the coverage for employee sickness, accident or disability coverage, or an income insurance plan, these payments you make as an employer can be paid.

It is not uncommon for many businesses to have their children work for the company on a part time, or even full time basis.   The employee expenses incurred for this can be handled just the same as for any other employee.  What is important is to make sure that the payments made for the work provided are recorded.   If paid by cash then the child must sign a receipt.

The child must be paid comparable to whatever a non-family employee would be paid for the same work.   Payment cannot be out of this range simply because it is a relative. These same rules apply if it your spouse or common law partner working for you.

Keeping impeccable payroll records will help you to comply with not only your payroll obligations, but your tax filings when it comes to calculating your expenses.   Your business tax accountant needs all of these records to be in proper order when completing your taxes for you.

Where you do not want to get confused in regards to your deductions is in respect to payments that are being made to yourself or your business partner by way of draws. These are not to be included in your expenses.

Deciding whether to draw a wage or dividends for yourself as the business owner is something you need to discuss with your accountant as to what is best for you and your business.

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Sam Seidman, CPA, CA, LPA
629 Sheppard Avenue West
Toronto, Ontario
M3H 2S3

Telephone: (416) 398-1700
Fax: (416) 398-6226

Chartered Professional Accountant, Chartered Accountant, Licensed Public Accountant


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