CCPC notional accounts
TIME MACHINE requires the current balance of the company's accounts for tax purposes. To simplify calculations, considering both personal and corporate taxes, the TIME MACHINE assumes a tax year-end of December 31. Whoever does your corporate taxes should be able to tell you the value of the accounts. The TIME MACHINE will ask for:
Retained earnings:Last year's retained earnings. From the consolidated statement of changes in equity. Enter only what has not yet been deposited to the CCPC investment accounts. Dividends and salaries can be paid out from this account. Note that to pay out dividends and salaries this year, the TIME MACHINE uses last year's retained earnings not yet invested, and withdrawals for the CCPC investment account when necessary. It then add this year's revenues to Retained Earning and removes taxes and deductions. If there is a positive balance, it deposits it to the CCPC accounts (in order of priority). Retained Earnings should then be zero at the end of the year. If not, the business has a a cash flow problem. The TIME MACHINE uses Retained Earning as the CCPC's Wallet account.
AAII: Adjusted Aggregate Investment Income.
This is the passive investment income received last year. If higher than $50,000 it will reduce the Small Business Deduction for this year, resulting in higher taxes on your active income.
GRIP: General Rate Income Pool.
When the corporation receives eligible dividends, the pre-tax dividend amount is added to the GRIP account. The corporation can pay out eligible dividends only up to the GRIP balance.
eRDTOH: Eligible Refundable Dividend Tax On Hand.
This keeps track of the amount of tax paid when the corporation receives eligible dividends. When the corporation then pays out eligible dividends, the eRDTOH is refunded to the corporation. Note, eRDTOH can also be released when non-eligible dividends are paid out, but since non-eligible dividends are taxed at a higher rate, that is generally not done.
nRDTOH: Non-Eligible Refundable Dividend Tax On Hand.
This account keeps track of the amount of tax paid when the corporation receives foreign dividends and interest income. A portion of this income is recorded in the nRDTOH. The nRDTOH is refunded to the corporation when the corporation pays out non-eligible dividends.
CDA: Capital Dividend Account.
This account keeps track of the non-taxable half of realized capital gains. The accumulation of those gains can be used to dispense a tax-free capital dividend. Although you can take up to the CDA balance out of the corporation tax-free, there can be high lawyer or accounting fees for doing so as it requires a special filing with the CRA.
To get the taxes correct for the current year, we additionally need to know how much was received in interest, foreign dividends and realized capital gains and losses in the corporate investment accounts.
If the CCPC does not qualify for the Small Business Tax Deduction you can also specify that on this form. If the business is incorporated in Québec, there are additional requirements for a CCPC to qualify for the Québec Small Business Tax Deduction. Among them is that total number of hours worked by employees (including part time employees) is 5,500 hours per year. You will also be able to specify if the CCPC qualifies Québec Small Business Tax Deduction. The corporate TIME MACHINE
The Save values for this session? box can be checked if you do not need to go over these inputs before running the TIME MACHINE next time.You will be able to see the value of these accounts, along with the corporate taxes paid, in the Excel file that can be downloaded and opened with any spreadsheet program. There are also links to view the CCPC tables to copy/paste or to print them.