Introduction
The year-end meeting is the most important conversation an incorporated professional has with their CPA each year. Done well, it is a 60–90 minute planning session that produces decisions with six-figure compounding consequences. Done poorly — or not done at all — it is a filing appointment where the decisions from the year just closed are noted but not changed.
This article describes what a well-run year-end planning conversation covers, so incorporated professionals know what to expect and what to ask for.
Before the Meeting: What to Prepare
A productive year-end meeting requires current financial information. Your CPA should have, or you should bring:
Year-to-date corporate financial statements (income statement and balance sheet) — ideally as of September or October, with a full-year estimate.
A summary of significant transactions during the year: equipment purchases, large client payments, unusual expenses.
Your personal income from all sources outside the corporation (investment income, rental income, a spouse's income).
Your current RRSP balance and unused contribution room (from the prior year's NOA).
Current status of the shareholder loan account.
What the Meeting Should Cover
1. Full-year income estimate
The CPA projects total corporate income for the year based on year-to-date results. This is the starting point for every decision that follows.
2. Compensation decision
How much salary to draw before the fiscal year closes. How much — if any — to accrue as a bonus (and what the timing implications are). Whether dividends should be declared before or after year end, and in what amount. This decision should be made before the year closes, not reconstructed afterward.
3. RRSP contribution planning
How much RRSP room is available. Whether to contribute to a personal RRSP or a spousal RRSP. Whether the contribution should be made before the fiscal year end or before the RRSP deadline in March.
4. CCA and immediate expensing review
Are there planned equipment purchases that should be made before year end? Is there equipment currently in service that qualifies for immediate expensing? What is the impact of claiming full CCA vs. a reduced amount in this year?
5. Shareholder loan review
What is the current shareholder loan balance? Is any amount approaching the one-year repayment deadline? What action is needed before year end?
6. Passive income review
What is the estimated AAII for the year? Is the corporation approaching or exceeding the $50,000 threshold? Are there actions available before year end to manage the threshold — additional dividends to reduce the investment portfolio balance, or a transfer to the holdco?
7. HST position
Has the corporation's taxable revenue crossed a filing frequency threshold? Are there any outstanding HST input tax credit claims?
8. Forward-looking considerations
Are there any significant changes anticipated in the coming year — income materially higher or lower, major capital expenditures, a potential sale? Planning for the next year begins at the current year-end meeting.
Questions to Ask Your CPA
If you leave a year-end meeting without asking these questions, you should follow up:
"What is the optimal salary vs. dividend split for this year, given my personal income?"
"What is my RRSP room for next year's contribution?"
"Is my corporation approaching the passive income threshold?"
"Should I make any equipment purchases before year end?"
"What will my instalment obligations be for next year?"
When This Meeting Should Happen
October or November — six to eight weeks before the fiscal year closes. At this point, the full-year income is estimable with reasonable accuracy, and there is still time to make changes. A December 31 meeting or a February meeting is too late. The window for the decisions described above has closed.