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Banking & accounting

Tips for bringing your banking and accounting together at tax time 

Just like in any relationship, communication is key.

Both your banking partner and your accountant have roles to play in your financial success – and they have different ways for doing so. That’s why when tax time rolls around each year, ensuring good communication and understanding between these two – and you – can help give you many happy returns.


Here, CWB’s Trevor Palmer, AVP Business Development, Edmonton South District, provides his top tips from a banker’s perspective for helping to connect the dots.


Business owners

Like all great relationships, communication is key, says Palmer. “Gearing up for tax time, it’s all about making sure the client, the banker and the accountant all have clear line of sight on the end goal.” 

Tip #1: Connect your accountant to your banker.
They should know each other and be willing to speak to each other. Pro tip: Have a meeting with both of them at the same time. This will help them understand each other’s expectations for your financial statements.


Tip #2: Have financial covenants? Ensure your accountant understands how the bank calculates the ratios. If your accountant has a reason to recommend a tax-based transaction that may cause a breach, it’s important to have the conversation with your banker, too. This helps all sides understand the rationale.


Tip #3: Make sure intercompany transactions don’t cause a possible breach with your bank. It’s your accountant’s job to help find tax exemptions, tax breaks, and write offs that can have a significant impact on how much income tax your business needs to pay. But be careful this doesn’t inadvertently cause a breach to your covenants. For example, there’s nothing worse than having a fantastic year, only to be noted in breach because a shareholder’s loan was repaid without the bank’s consent (Hint: this would be a breach of an Assignment and Postponement of Creditor’s Claim that’s been granted in the bank’s favour).


Tip #4: Profits mean paying taxes…profits also mean strong EBITDA. Profits equate to healthy earnings before interest, taxes, depreciation, and amortization (EBITDA), which is what banks use to calculate the borrower’s ability to pay off their debts. If net EBITDA is considerably lower because profits have gone towards dividend or shareholder loan reduction as part of a strategy to pay less income tax, there can be implications with the bank and their covenants. 



Openness and organization go a long way when preparing for your personal income tax filing. “Be forthcoming with your accountant and your bank about your goals and start the process early to avoid last-minute scrambles,” says Palmer.


Tip #1: Talk to your accountant about your overall strategy for claiming personal income tax. Accountants will work to set you up for paying the lowest tax threshold, but they need to understand your full picture. That’s where being open about your financial goals and plans comes in.


Tip #2: Also a business owner? Ensure your corporate accountant is talking to your bank about how they’re planning to record your personal income. There’s a difference between drawing a salary, repaying shareholders’ loans, and/or paying dividends (or a combination of all), and often the amount drawn from the Corporation is determined by both the corporate and personal tax implications.


Tip #3: Be organized and proactive! Get together with your accountant soon after Dec. 31st each year.

Keep important tax-related documents in a handy, easy-to-access format so you can work with your accountant to do a preliminary income tax return early in the new year. This helps you gauge things like whether you should consider investing in RRSPs to lower your taxes. Pro tip: Your bank may have an inexpensive way to borrow money (e.g. an RRSP loan) that can help maximize your tax savings. That said, they do need some advance notice. So be proactive and plan ahead…like maybe try your hardest not to show up for an RRSP loan on Feb. 25th! (Hint: The RRSP deadline for 2021 contributions is March 1, 2022).


You’ve got people in your corner

Even though it’s inevitable every year, tax time can still be a little daunting. But with people in your corner like your banker and your accountant, you can balance effective tax saving strategies with smart banking ones.


Got an appetite for more info? Give these resources a read: 

RRSP, TFSA, or both? The truth is…it depends

Tax planning: Quick facts and common strategies