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Sparhawk
Level 1

Paying myself, deductions and business income

I'm in Ontario, Canada. I started a sole proprietorship.

 

I need clarification about paying myself vs money the business made.

 

1) Let's say I charge my customer $100/hour for a service, and I decide to pay myself a wage of $25/hr. How do I pay myself, how do I subtract all the necessary deductions when I pay myself. In previous jobs I have had employers deducts Federal Tax, Provincial Tax, EI and CPP. How do I do that on the money i pay myself. How do I enter this into QBSE?

 

2) At the end of the year does any money my business made count towards my personal income when I do my personal taxes? That is to say, not just the $25/hour I payed myself, but the leftover $75/hr the business made? Or does the business pay taxes on that separate from my personal taxes.

 

Thanks

3 Comments 3
LauraAB
QuickBooks Team

Paying myself, deductions and business income

Hello Sparhawk,

 

Getting to the point in your business where you can pay yourself is exciting! I can appreciate the importance of sorting out these kinds of details about how to account for that information, and getting guidance for doing so the first time is a great idea. I want to make sure you're getting the details you need for these calculations and can point you in the right direction for working with your payroll and other financials in QuickBooks.

 

I'd like to start with addressing QuickBooks Self-Employed since that's the product you're using. QuickBooks Self-Employed is designed for self-employed entrepreneurs to track invoicing, expenses, taxes, and mileage. This version of the software doesn't include a payroll module, so figuring out how and if you should be entering that data into your books is something that I recommend connecting with an accountant for. Another great resource you can consider is the CRA website, which has a lot useful information for business owners and self-employed entrepreneurs about payroll.

 

Working with the rest of the information you've outlined is also something that I suggest consulting an accountant on. They'll be able to let you know what, if any, of your business financials can count toward your personal taxes. With an accountant's guidance, you'll be able to accurately and confidently remit to the government come tax time.

 

If you're interested in a version of QuickBooks that does have a payroll module, check out QuickBooks Online. The Online version is built for small business owners who need more features than what QuickBooks Self-Employed offers. It's still a cloud platform and also includes a mobile app for on-the-go work. I've got a few links here that can help with your decision on this.

Wishing you the best with this!

Sparhawk
Level 1

Paying myself, deductions and business income

Unfortunately I can't afford an accountant at this point so I guess I am on my own. From what I gather though, as a sole proprietorship the business income is my income, and since I don't have employees I don't think I need the payroll module..From what I read on the CRA website, come tax time I submit a T2125 along with my T1 when doing my personal taxes. Here is the CRA page I found: https://www.canada.ca/en/revenue-agency/services/tax/businesses/small-businesses-self-employed-incom...

 

I assume what this means is at the end of the year I am going to have a big fat bill for Federal and Provincial taxes, and maybe CPP and EI fees too. To be on the safe side I'll save most of my money I make so I don't run short come tax time next year.

 

If I make enough money to afford an accountant I'll hire one before tax time.

 

Thanks

 

LauraAB
QuickBooks Team

Paying myself, deductions and business income

I hear what you're saying about not being able to afford an accountant right now. You may also get input from other users in the same boat or who have accounting backgrounds here in community, so feel free to keep an eye out for other replies. While I still always recommend an accountant to double check, others here may still have some guidance for you. Setting funds aside is also a good idea, just to make sure you're covered. Take care!

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