There is ample opportunity in today’s society to give back to organizations in need of monetary donations. Most people can list off several organizations worthy of being the recipient of their hard earned money. Making the decision to donate and who will get your money is the first step in giving back.
But it’s also important to consider your own situation so that you maximize your donation and ensure you get the best tax credit available. In this blog post, our Tax Manager, Mary Ann Donahoe looks at the important question - which is the best option, donating directly from your corporation or donating personally?
Well the answer isn’t simple. There are a number of things to consider:
For the corporation
You need to determine the tax rate of the corporation, whether it is taxed at the small business corporation rates, the general income rates or taxes on investment income rates. Also the corporation must be taxable to benefit from the deduction. This will determine the tax saving for your corporation.
For the personal donation
If you are donating personally you will need to access funds from your company. You need to either take a wage or a dividend to draw the money out of the company and take the tax on that income into consideration when calculating the best option. So which is a better option - a wage or a dividend? Well, that depends!
What is your personal tax rate? What tax bracket are you in? That will determine how much tax you will pay on the wage or dividend you take from the company.
One thing we know is in PEI the tax saving on donations in excess of $200 is 45.7% of the donation.
The next step is to do the math. Look at the potential tax saving in your particular company and compare that to the net tax saving personally after taking into consideration the extra income (wage or dividend) you need to make the personal donation.
In general terms, if you are in a lower tax bracket personally it is usually more beneficial to make the donation personally. The higher your income the more likely the benefit will revert to a company donation.
For example, using a Canadian Controlled Private Corporation in PEI with income eligible for the Small Business Deduction and comparing the savings by the company verses an individual in PEI whose income is in the “middle” tax bracket (45-63K) or the “highest” tax bracket (over 200K).
With the “middle” income calculation, it is more beneficial to take a wage from the company and make the donation personally. There was an additional 11.4% tax saving compared to a corporate donation.
With the “high” income calculation, it was better to make the donation in the company with an additional tax saving of 5.67% compared to taking a wage from the Company and making the donation personally.
As you can see, donating from your personal account versus your corporate account can have different implications. It is important that you are informed and have the best strategy in place so that you are maximizing your money.
We recommend that you consult your tax adviser to obtain advice that is specific to your situation.
We are pleased to share in this announcement as our colleague at Teed Saunders Doyle & Co., Andrew Logan, CPA, CA is the new president of DFK Canada. We congratulate Andrew and look forward to his leadership in the coming years. We thank outgoing president Paul Panabaker, FCPA, FCA, CFP, RFP, TEP for his contributions to the association. We also welcome Lynn Morrovat as the organization's executive director.
The following blog post is provided by Cathy McPhail, BA, PMP, Cert.APM, Senior Consultant within our consulting division.
Communication is the “successful conveying or sharing of ideas and feelings” (Oxford Dictionary) and ineffective communication is one of the most frequently cited reasons for projects falling short of their goals (PMI Pulse of the Profession Report Series).
The value of effective communications is not limited to projects, it is also extremely important to businesses and other organizations. Effective communication has been described as, “the lifeblood of business”, “a building block of successful organizations”, and “the best opportunity to make an outstanding first impression”, among others. A report from Accenture in 2013 found the top priority for high-performing CIOs is providing the right information to the right person at the right time. In my experience, right format and right feedback also play a role in effective communications. Below are a few thoughts on each of the five R’s. Hopefully they will inspire you to increase the effectiveness of communications in your organization.
Right information – Effective communication is much more than the distribution of information. The key element is knowing what information will enable individuals to do their job or fulfil their role better and to ensure that is the information they get.
Right Person – The formula, N*(N-1)/2 (where N is the number of people in a team or organization), illustrates how even a small team or organization has multiple communication channels and typically they do not all need or want the same level and type of communication. A well thought out communication matrix, vetted by the individuals in the matrix, can help.
Right time – Obviously, having the right information in the hands of the right people in enough time for it to enhance decision making is extremely important. It can also be useful to stay in touch with what is going on throughout your organization or business environment so you can judge when communications are most likely to get the attention they need. If a colleague or department is faced with a looming deadline an interruption in the middle of the work day may be unwelcome and ignored. Some individuals like to catch up with emails after office hours, others do not. Marketing research has found that email open rates are higher earlier in the week and later in the day and reply rates are highest in the evening. But as each organizational culture is unique, there is no substitute for knowing your own work environment.
Right format – At MRSB Consulting we are making a conscious effort to practice ‘thoughtful reporting’. We realize our clients are busy people with a lot of demands on their time and attention. It is our job to reduce the quantity of text in the reports we prepare for them while enhancing quality analysis and readability with descriptive headings and impactful visuals. An effective communicator must continually consider the best match between the content of the communication and the needs and preferences of those he/she is communicating with. For example, email and group meetings are not suitable for sensitive topics and face-to-face meetings are probably not required to change the date and time of a meeting.
Right feedback – And finally, effective communication is not a one way street. The best communicators structure opportunities to provide feedback and watch for and respond appropriately to that feedback.
If you would like to provide feedback or share other R’s of effective communications, please email me at email@example.com.