What to do now that residency is done
With residency done and now that you are in the real world here are some tips for starting out.
Get a separate bank account and credit card for your business. Having everything go through your personal account leads to a mess in record keeping and increases risks for a potential CRA audit.
Get an Accountant. (Reach out to taxfordoctors as soon as possible). You will have lots of questions and you will need someone who understands Doctors and can give you guidance. Your accountant will help you quarterback everything else you have to deal with, and you don't want to look for one in April when it is time to pay your taxes.
Figure out a bookkeeping system (or find someone who can do the bookkeeping for you). Few Doctors actually enjoy bookkeeping or payroll. Using technology will help though (see our technology page https://www.taxfordoctors.ca/technology/). But whatever technology you choose you will still need someone to do the bookkeeping. It could be your accountant, a spouse or yourself. No matter who it is, make sure they understand your industry and that they can do the work for you. It is best to find someone sooner than later. (see here: https://www.taxfordoctors.ca/bookkeeping/)
Put aside money for taxes. If money is going in to your personal bank account without any deductions for taxes you will have a large tax bill come April. Ensure you can afford it. For the first year (or 6 months of practice from July to December), we recommend putting aside 40% to 50% of the money received personally. This should make a good dent in your taxes when they come due in April. (if you have room in your TFSA, that is a good place to store the money).
Get your insurance updated. Now that you have a significantly larger income, you need to figure out how you are going to protect it. Disability insurance is the first place to go. Once you have enough Disability, get enough life insurance (especially if you have dependents) and then some Critical illness for good measure. Need help finding an advisor - let us know.
Figure out how much debt you can handle. People’s comfort level with debt is not always the same. Generally though the question is how much interest you are paying and how much you can earn! If you do have a line of credit, please contact the bank PRIOR to paying off the debt as it is possible that the bank (ie. RBC) will cap the debt at the amount sitting in the account after one or two years of being done residency unless you transition to a new plan. There is little long term benefit of paying off the debt if the room will be lost, that is assuming you are comfortable with the amount of debt present. (there may also be a way to make your debt tax deductible).
Incorporation - maybe. You likely have heard about all those older Doctors incorporated and received large tax savings from income splitting with their family members. Due to tax changes in effect starting 2018 this will unlikely work to the same degree as it did for them. But there may be other reasons to incorporate. Reach out for a further discussion.
We hope this summary helps. We will be releasing more in-depth discussion on each item within our help guide. In the meantime, please feel free to reach out to our team to help you with the transition to practice.
Oh... and if you think we missed something please let us know that too so we can update the article.
Have questions? email firstname.lastname@example.org