Let me tell you about the time my team and I saved an oncologist $30,000 to $40,000 in taxes — per year. She was shocked. We weren’t.
It all started a few years ago at a friend’s cottage where I was chatting with the oncologist over a coffee. The conversation had turned, as it does, to grousing about taxes and how much we pay. I listened politely as she went on a long diatribe about what she paid (admittedly, quite a bit) and how she would do almost anything to cut her tax bill.
Well, I love a good challenge. “Are you incorporated?” I asked. She replied, (and in fairness to her, this was before it was common knowledge thatdoctors can incorporate), “I’ve heard this is supposed to be a good idea, but I’ve never looked into it.” But, I logically pointed out, if she was half as peeved about her tax bill as it seemed, she couldn’t afford to wait any longer. Her current situation was costing her thousands of dollars a year in taxes. The challenge had been extended.
Although she was skeptical my team and I would find significant savings that her accountant hadn’t, she had nothing to lose and agreed to book a meeting with her husband at my office.
We had the couple complete a detailed questionnaire that included their assets, liabilities, goals, monthly spending expectations as well as their income. This allowed us to prepare a few scenarios to compare against their current situation.
We were able to come up with the savings opportunities by having her incorporate and keep expenses at a reasonable level based on their estimated lifestyle needs. Once they became clients, part of our service offering was to help them determine how much they should take in salary, in dividends, and to keep in the corporation for future use. These uses could range from funding retirement, paying for children’s post-secondary education, funding their lifestyle, making charitable contributions and others. We offer this service at no additional cost.
This story doesn’t mean that incorporating is something every doctor or business owner should do. There are situations where it doesn’t make sense. However, if you aren’t incorporated and are able to, you should definitely look into it. Raymond James Ltd. outlines the pros and cons of incorporation.
While, it’s fairly commonplace to leave tax-saving strategies in the hands of accountants, we’ve found that many accountants are so overburdened by the amount of clients they have that they often miss savings strategies.
Looking back, I’m sure the oncologist agrees that that was the first time complaining about a problem actually fixed it. So bring us your concerns, I haven’t backed down from a challenge yet!