draws/wages


T

trish

Hi there I have a sole propieter buisiness and do not yet pay myself
regularly but take out a bit here and a bit there so i dont take a lot
of money out of the company. Now the place is doing better I wonder
when does a draw become a wage and cpp and other payroll deductions
come in? Thanks in advance
 
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P

Paul Thomas, CPA

Hi there I have a sole propieter buisiness and do not
yet pay myself regularly but take out a bit here and a
bit there so i dont take a lot of money out of the
company. Now the place is doing better I wonder
when does a draw become a wage and cpp and other
payroll deductions come in? Thanks in advance



You are in Canada, or so it seems, so my reply may not be fully accurate as
it is based on US tax laws.

Draws by a self-employed person are not subject to payroll taxes, but they
aren't allowed deductions of the business either. You will be taxed on the
net profits of the business regardless of how much or little you draw from
the business.

Whatever taxes apply to the net profits of a self-employed person apply.
Here in the US it's self-employment tax (Social Security and Medicare) as
well as income tax at the federal and state level.
 
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W

wilma2

You are in Canada, or so it seems, so my reply may not be fully accurate as
it is based on US tax laws.

Draws by a self-employed person are not subject to payroll taxes, but they
aren't allowed deductions of the business either. You will be taxed on the
net profits of the business regardless of how much or little you draw from
the business.

Whatever taxes apply to the net profits of a self-employed person apply.
Here in the US it's self-employment tax (Social Security and Medicare) as
well as income tax at the federal and state level.

thanks Paul I appreciate your advice, I am sure Canadian laws are
close. So it is best to pay them once a year? Trish
 

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