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
draws/wages
Jul 24, 2007
2 Replies
wrote
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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