Weekly Tax Tips
Defer Tax on Accrued Corporate Bonuses
Date: 10 Jun 2011
When bonusing out corporate income, a deferral is available. A bonus is generally deductible to the corporation in the year it is accrued, if it is paid within 180 days of the corporation's year-end. And it is generally taxable to the individual as employment income when it is received.
If the corporation's year-end falls within the last half of the calendar year (i.e. ending after July 6th), the bonus could be paid out after December 31. So income would not have to be recognized personally for tax purposes until the next calendar year. Note that salary withholdings for income tax, Canada Pension Plan and Employment Insurance (where applicable) would need to be made shortly thereafter, depending on the corporation's remittance schedule, but the tax would have been deferred for six months.
This tax tip is a publication of BDO Canada LLP on developments in the area of taxation. This material is general in nature and should not be relied upon to replace the requirement for specific professional advice. The information in this tax tip is current as of 10 Jun 2011.
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