Parental Sponsorship - Dividends - Self Employed - Eligibility?

[Mirapakay]

Hello Experts,

I would like to know if being a Self Employed individual, one would be eligible for Parental Sponsorship. Especially, if one is being paid as dividends instead of salary (which is only paid at the end of the year) but still meeting the amount for respective number of people in the family. For example, for a family of 3 including the applicant, having paid a dividend of $50K instead of a salary.


Thanks!

 

[scylla]

Hello Experts,

I would like to know if being a Self Employed individual, one would be eligible for Parental Sponsorship. Especially, if one is being paid as dividends instead of salary (which is only paid at the end of the year) but still meeting the amount for respective number of people in the family. For example, for a family of 3 including the applicant, having paid a dividend of $50K instead of a salary.


Thanks!

Anything that appears on line 150 of the return can be included.

 

[Mirapakay]

Anything that appears on line 150 of the return can be included.

Thank you very much @scylla !

 

[canuck78]

People who are self-employed and minimize how much of a salary they pay themselves for tax reasons often run into problems with PGP. People need to consider needing to meet LICO when deciding their personal salary no matter how well their business is doing.

 

[Mirapakay]

People who are self-employed and minimize how much of a salary they pay themselves for tax reasons often run into problems with PGP. People need to consider needing to meet LICO when deciding their personal salary no matter how well their business is doing.

Hi @canuck78 , thanks for cautioning about that. How much of self-employed salary do you think would be ideal?

 

[canuck78]

Hi @canuck78 , thanks for cautioning about that. How much of self-employed salary do you think would be ideal?

Your personal income must be over LICO for your family size.

 

[armoured]

Your personal income must be over LICO for your family size.

I believe LICO can be adjusted in future, though? Therefore it would be unwise to have personal income at/too near the current level.

But this is a question, I'm uncertain.

 

[Mirapakay]

Your personal income must be over LICO for your family size.

How much more over LICO should I be showing is the question? If you could please throw some light on that, it would be helpful @canuck78.

 

[mkcan]

Anything that appears on line 150 of the return can be included.

Hi Scylla, unfortunately, my taxes were filed incorrectly by a fresher accountant hence the amount on line 150 needs to be corrected. Is there any way I can fix it ?

 

[Copingwithlife]

Hi @canuck78 , thanks for cautioning about that. How much of self-employed salary do you think would be ideal?

You don’t work your self employment income to fit your situation.
You have Gross self employment income , you deduct your legitimate self employment expenses , leaving you with your net self employment income .
That’s your self employment income
We’ve already seen what happens when people work their self employment income numbers with covid benefits

 

[scylla]

Hi Scylla, unfortunately, my taxes were filed incorrectly by a fresher accountant hence the amount on line 150 needs to be corrected. Is there any way I can fix it ?

I don't know. I would suggest you find a new tax accountant and have that tax accountant refile your taxes asap. You don't have much time given you have to submit your complete application within 60 days. Hard to say if this will give you enough time to refile for all of the years impacted. If you did not properly declare your self-employment income in the tax returns you have filed so far in order to tax shelter your income, then you need to be prepared to pay additional tax when you refile so that you can qualify to sponsor your parents. Note that only income in your personal tax return is considered towards LICO - your business tax return is not considered.

 

[Copingwithlife]

Hi Scylla, unfortunately, my taxes were filed incorrectly by a fresher accountant hence the amount on line 150 needs to be corrected. Is there any way I can fix it ?

You have to either file a T1-Adjustment or send a letter to your tax centre indicating tax year you tax want adjusted or a detailed letter giving the new information for the adjustment
You can if you have a MA, do an adjustment thru there
If I were you , and doing an T1 Adjustment
Do it online if time is of the essence
If it’s a normal adjustment, it could auto adjust, then if there’s questions later about the changes the CRA will reach out to you, as with any tax returns , Canada uses a self assessment process . Any returns submitted are subject to verification later on .

 

[canuck78]

I believe LICO can be adjusted in future, though? Therefore it would be unwise to have personal income at/too near the current level.

But this is a question, I'm uncertain.

Yoù should leave a good buffer but just another consideration if you pay yourself a minimal salary because you don’t need the income looking at the LICO levels may change how much you pay yourself if you are considering sponsoring your parents or in-laws in the future.

 

[armoured]

Yoù should leave a good buffer but just another consideration if you pay yourself a minimal salary because you don’t need the income looking at the LICO levels may change how much you pay yourself if you are considering sponsoring your parents or in-laws in the future.

Yes, I'm not considering, but meant as warning to others that pay themselves in this way: they should consider that the required LICO levels may change in future and not, for example, structure their pay based precisely on what LICO is required today (but provide for some buffer).

How much it could change in future is anyone's guess, of course - but at least allowing for some nominal inflation in future would be better than having no buffer.

 

[nayr69sg]

Yes, I'm not considering, but meant as warning to others that pay themselves in this way: they should consider that the required LICO levels may change in future and not, for example, structure their pay based precisely on what LICO is required today (but provide for some buffer).

How much it could change in future is anyone's guess, of course - but at least allowing for some nominal inflation in future would be better than having no buffer.

You can gauge the increase in LICO year to year from past information. Then estimate in the generous side what it might be for the next year.

With covid 2020 LICO levels dropped considerably. I would chalk it out. Go by the 2018 2019 ones for 2021 and 2022.