Bonus and salary for owner

Accounting and Bookkeeping
1

I have very little experience with salary/payroll.

However, I have a few clients (incorporated) that want to do a bonus to themselves or even a random salary every year.

How do I structure this in excel? I don’t want to use/pay for a payroll service yet.

For example - a $85,000 bonus declared Dec 31 2025.

Dr. Bonus Expense

          Cr. Bonus Payable

Now I need pay out the bonus (within 180 day)

Dr. Bonus Payable 85,000

          Cr. CPP 1 = 4230.45

          Cr. CPP 1 - ER = 4230.45

           Cr. CPP 2 = 416

          Cr. CPP 2 - ER = 416

         Cr. EI = 0 (exempt)

          Cr. Tax - this is my issue - how do I calculate this for Ontario?

         Cr. Cash

This is in Ontario and I can figure out the CPP1 CPP2 (EI is exempt). My issue is how to I figure out the tax to remit?

2

use PDOC to calculate taxes to be deducted.

3

There are a number of methods…

  1. don’t deduct any tax (technically, it is NOT a required deduction vs salary, but if you DO deduct it, you MUST remit it). Client simply pays instalments.
  2. Run a T1 for your province using a test file with similar characteristics to your client…you’ll get a tax amount. Deduct and pay it. (FWIW I find it useful to always have “Single” and “Married” tester files each year.)
  3. Take a guesstimate (say 20%). Will it be “close”? Yes.

Edit: I wouldn’t bother keeping separate GL entries for CPP1 and CPP 2. There’s little point unless your GL software doesn’t also generate T4s from manual payroll entries.