Client Scenario Example:
MR. AND MRS. MATTHEWS CAME TO IANNELLO AND ASSOCIATES LOOKING FOR TAX PREPARATION SERVICES AS THEY FELT THAT THEY WERE NOT GETTING VALUE ADDED ADVICE FROM THEIR CURRENT ACCOUNTANTS.
– Mr. Matthews is an executive for an insurance company earning about $300,000 per year (T4)
– Mrs. Matthews is a real estate agent earning $250,000 in self-employed commissions per year
– The family requires $225,000 per year to meet their personal lifestyle obligations
Their current accountants were preparing personal tax returns for them on an annual basis and Mrs. Matthews claimed all of her commissions personally as a sole-proprietor.
Under their current structure they were paying about $225,000 per year in tax/CPP/EI, leaving them with about $325,000 after-tax, or $100,000 remainder after their personal expenses. Not bad, but as you’ll see there’s much room for improvement.
After some careful analysis, we made the following changes.
– INCORPORATE A COMPANY TO CARRY OUT MRS. MATTHEW’S BUSINESS
– PAY MRS. MATTHEWS A SALARY OF $70,000 PER YEAR FROM SAID CORPORATION
– RETAIN EARNINGS IN HER CORPORATION TO FUND THEIR FUTURE RETIREMENT
– BUILD A TAX EFFICIENT CORPORATE INVESTMENT PLAN
Under the new plan, they were now paying a total of $166,500 in annual tax, leaving them with $158,500 per year to save and invest. That’s a $58,500 per year improvement, or a 58.5% improvement.
To put that in context, $58,500, invested annually over a 20-year period at a 5% rate of return would give this family an additional $1,934,000 in retirement savings.
At Iannello and Associates we solve these types of issues on a daily basis and have done so for hundreds of clients. We start with tax and integrate your entire financial plan under one roof to ensure your business and family end up with the most financially secure future possible.