The 2020 pandemic is putting unprecedented strain on all Canadians. The federal government has announced a number of programs and have extended tax return filing deadlines and the payment deadlines.
· Personal Income Taxes
· Corporate Income Taxes
· HST registrants
· Trusts and partnerships
· GST Credit/ Enhanced Child Benefit/Student Loans
Please check out the parts of this checklist that apply to you.
Personal tax returns for 2019 are not due until June 1 this is a full month later than the usual April 30 deadline. If you are expecting a refund then there is no reason to wait to file. If you owe money you do not have to pay until September 1, 2020 and no interest will be charged until after that date.
If you are receiving the Child Tax Benefit or the HST credit you should file your personal income tax return as soon as possible. Entitlement for these programs in July of 2020 is based on having your 2019 return filed.
Personal tax installments for March 15, 2020 and June 15, 2020 do not have to be paid until September 1, 2020 and no interest will be charged until after that date.
Tax returns that would be due between March 18, 2020 and May 31, 2020 are now all due on June 1, 2020. Payment does not have to be made until September 1, 2020 and no interest will be charged.
The monthly corporate installment for March, April, May, June, July and August will all be due on September 1.
Payment of HST collected by quarterly filers for January to March of 2020 is not due until June 30, 2020. Monthly filers do not have to pay HST collected in February, March and April until June 30, 2020. Annual filers with returns due in March, April or May of 2020 have until June 30, 2020 to pay.
There are two wage subsidies available. A 10% subsidy that applies to most employers and a 75% subsidy that applies to employers whose revenue has decreased by 15% or more in March or 30% or more in April.
Please note that there is no deferral on filing and paying your source deductions.
Are your employees still being paid? Whether the answer is Yes or No, find out your next step with the COVID-19 Decision Tree.
This subsidy is available to most employers including Canadian Controlled Private Corporations (CCPC), charities, not-for-profit organizations, individual employers and partnerships. The legislation for the TWS was a part of Bill C13 and is now law, so this subsidy is available right now.
To receive the 10% wage subsidy, you need to calculate 10% of your gross pay and deduct that amount from your source deductions. Source deductions are the amounts you collect from your employees for EI, CPP and income tax plus the employer portion of EI and CPP. You normally send these payments to CRA on the 15th of the following month.
Eligible wages are those payments made between March 18, 2020 and June 19, 2020.
Example: You pay your employees every two weeks. The payment you made on March 31 to your employees qualifies for the TWS. Your gross pay for that payroll was $7,000 so 10% of that number is $700. You can deduct the $700 from the income tax number included in your source deductions you pay on April 15, 2020.
Let’s imagine that the following are your numbers for March 2020 and you will pay this on April 15, 2020.
Employment Insurance (EI) $400
Canada Pension Plan (CPP) $1200
Tax withheld from employees $ 1500
You will subtract $700 from the tax withheld number and send the Receiver General $2,400 which is the total of $3,100 less $700 for the TWS.
And for those of you who want the journal entry, you are going to debit your withholding liability account “income tax payable” for $700 and credit a revenue account that you will create called “Temporary Wage Subsidy."
You may not reduce your EI and CPP payment, only the tax payment.
The limit is $1,375 per employee and an overall limit of $25,000 per employer.
Fine print: You need to have a business number and an employer account in order to do this. If your taxable capital is over $15 million you do not qualify for TWS. If your corporation is a member of an associated group you are only eligible if you were allocated small business limit in the 2019 year.
The legislation for this subsidy was passed by parliament on April 11, 2020.
This subsidy applies to any employer whose revenue has decreased by 15% when you compare March of 2020 to March of 2019, or whose revenue has decreased by 30% when you compare April of 2020 to April of 2019.
The first claiming period is wages paid from March 15 to April 11, 2020. The revenue test however is calculated on a monthly basis. The month of March 2020 will be compared to the month of March 2019 to determine if the revenue decline is large enough to get the subsidy.
For the month of March the decline in revenue must be 15% or more. For the months of April and May the decline in revenue must be 30% or more.
Here is an example:
Revenue for March 2019 $75,000
Revenue for March 2020 $50,000
Reduction in revenue $25,000
Reduction in revenue divided by 2019 revenue $25,000/$75,000 equals 33.33% so since your revenue has declined by more than 15% in March you qualify for the CEWS. Note that if your revenue in March was not down by 15% then your revenue has to be down by 30% in April in order to make a claim.
You have to apply for this subsidy through your “My Business Account” with CRA. Once you have established your eligibility you will be eligible for the other time periods. The application will be available on April 27, 2020.
There is a difference in the calculation depending on whether the employee is an arm’s length or non-arm’s length employee. A non-arm’s length employee is one who is an owner of the business or is related to an owner of the business. For non-arm’s length employees, the amount of eligible wages is capped at what they were being paid before March 15, The purpose of this restriction is to prevent owners from increasing their own wages in order to take advantage of the subsidy.
For non-arm’s length employees, the amount of the subsidy is the lessor of:
- 75% of what you used to pay your employees before March 15, 2020
- 100% of what you are currently paying your employees
- $847 per employee per week
For employees who are at arm’s length from their employer the amount of the subsidy is the lessor of:
- 100% of what you are currently paying your employees
- $847 per employee per week There is no overall employer limit.
The amount that you are claiming for TEWS (the 10% subsidy described above) is subtracted from the amount that you can receive from CEWS.
CRA has provided an Excel spreadsheet that shows how to do these calculations. You can find it here https://www.canada.ca/en/revenue-agency/services/subsidy/emergency-wage-subsidy/cews-calculate-subsidy-amount.html
The application takes place through your My CRA account or by calling 1-800-959-2019.
If your birthday is in January, February or March you can apply on April 6, 2020.
If your birthday is in April, May or June you can apply on April 7, 2020.
If your birthday is in July, August or September you can apply on April 8, 2020.
If your birthday is in October, November or December you can apply on April 9, 2020.
If you have already applied for EI then there is nothing else for you to do. It appears that the CERB is replacing normal EI for a 16 week period and then regular EI will start if you are still unemployed at that time.
If you are receiving more than $1000 a month from employment or self-employment then you are not eligible for CERB. Note that this is a change – initially you were not allowed to earn any income and be on CERB.
The fine print: in order to be eligible for CERB, you have to have earned $5,000 or more of employment income or self-employment income in 2019. At the moment this does not include dividends, but this may change. An ineligible dividend is one that is paid out of income that was taxed at the small business rate. So most self-employed people if they are taking dividends from their corporations will be paying themselves ineligible dividends, check your 2019 T5.
You cannot get EI and CERB at the same time.
If you are going to need financing due to the economic hardships caused by Covid-19 then the Canada Emergency Business Account (CEBA) will be of help to you. You have to contact your bank, but the program is supposed to provide up to $40,000 is interest free loans. Your business qualifies if your 2019 payroll was between $20,000 and $1,500,000.
You will receive $10,000 of the $40,000 as a grant if you repay the loan in full by December 31, 2022. There will be no interest charged until January 1, 2023 at which time the interest will be 5% and you must fully repay the loan by December 31, 2025.
To apply you must have your 2019 T4 Summary near to you so that you can give the bank the total payroll as reported in box 14 as well as your 15 digit business number.
These returns which would have been due on March 30 are now due on May 1, 2020.
No T3010 is due before December 31, 2020.
The GST credit is increased by $290 per person, you do not need to apply, this will happen automatically.
Enhanced Child Benefit is a one-time payment of $300 per child which will be paid in May. No application required.
No payments of principal or interest need to be made between March 30, 2020 and September 30, 2020 on Canada Student loans.
https://novascotia.ca/coronavirus for details on the status of the virus in NS
https://canada.ca/coronavirus for details of the status of the virus in Canada