Covid-19 Free Small Business Webinar Series

Are you up at night worrying about the future of your small business? Do you know someone who is? Do you find yourself looking for insight, knowledge, and experience on keeping a small business operating and successful during volatile times?

Register today to get the information you need to help navigate a business through COVID-19 and beyond. Hear from experts on four major topics weighing on the minds of many:

10% Temporary Wage Subsidy (TWS) Reporting

You will need to keep information to support your 10% Temporary Wage Subsidy for Employers (TWS) calculation. The Canada Revenue Agency (CRA) may ask you to provide the following:

  • total eligible remuneration paid from March 18 to June 19, 2020
  • federal, provincial, or territorial income tax deducted from the remuneration paid
  • Canada Pension Plan contributions (CPP), Employment Insurance premiums (EI) deducted from the remuneration paid
  • total number of eligible employees employed from March 18 to June 19, 2020

Form required for reporting: PD27

Click the link for the: Form PD27 Use this form to reconcile the TWS on your payroll program (RP) accounts.

You need to complete and submit Form PD27 to the CRA if you are eligible to take advantage of the TWS and:

  • you already reduced your remittances
  • you intend to reduce your remittances (the form will help you calculate your eligible TWS amount)
  • you claimed the Canada Emergency Wage Subsidy (CEWS) and, as a result, need to confirm on Form PD27 the amount of the TWS you are taking advantage of (refer to Line F of your CEWS application).

Submit the completed form to the CRA as soon as possible to avoid receiving a discrepancy notice at the end of the year. You do not need to wait until you file your T4 information return. It can be submitted by the following methods:

  • online via My Business Account – scan and submit using “Submit documents”;
  • mail: Winnipeg NVCC, 66 Stapon Road, Winnipeg MB, R3C 3M2; or
  • fax: 204-984-4138.

If you were not eligible for the subsidy

The CRA will use information from your Form PD27 to reconcile the subsidy on your payroll program (RP) account(s). If you reduced your payroll remittances, but it is later determined you were not eligible for the TWS, the CRA will assess you for the income tax you deducted from your employees’ pay, but did not remit. This assessment may include penalties and interest.

Reporting the subsidy as taxable income

If you take advantage of the TWS, you must report the total subsidy amount as income on your tax return in the same year you reduced your remittances.

CEBA Loan Requirements, Amounts, and Deadlines Have Changed

December 7, 2020 Update

  • Eligible Canadian businesses that currently operate through a personal or business bank account will be able to apply for CEBA.
  • All applicants have until December 31, 2020, to apply for the $40,000 initial loan and until March 31, 2021 for the $20,000 expansion loan at your financial institution.

Eligibility Requirements for the initial $40,000 loan

The CEBA application process follows one of two streams: (i) the Payroll Stream (Applicants with employment income paid in the 2019 calendar year between Cdn.$20,000 and Cdn.$1,500,000) or (ii) the Non-Deferrable Expense Stream (Applicants with Cdn.$20,000 or less in total employment income paid in the 2019 calendar year).

Every applicant must meet the following criteria:

  • Has an active CRA Business Number (BN) with an effective date of registration on or prior to March 1, 2020.
  • Has an active business chequing/operating account with the Lender at the time of applying for CEBA. Note: If Borrower currently does not have a business chequing/operating account the Borrower must create one at their primary financial institution before applying for CEBA.
  • Has not previously used the Canada Emergency Business Account Program (the “Program”) and will not apply for support under the Program at any other financial institution.
  • Intends to continue to operate its business or to resume operations.

If you fall into the Payroll Stream and once you have completed the application with your financial institution, the Government of Canada will assess the application and inform your financial institution of the approval or decline of the loan. If approved, your financial institution will provide the funds into your business chequing / operating account.

If you fall into the Non-Deferrable Expenses Stream you must also meet the following criteria:

  • Have eligible non-deferrable expenses between Cdn. $40,000 and Cdn. $1,500,000. Eligible non-deferrable expenses could include costs such as rent, property taxes, utilities, and insurance. Expenses will be subject to verification and audit by the Government of Canada.
  • Filed an income tax return with the CRA with a tax year ending in 2019 or, if its tax return for 2019 has not yet been submitted, 2018.

CEBA applications under the 2020 Eligible Non-Deferrable Expenses Stream will follow a three-step process:

Step 1: Complete the online Pre-Screen Tool. The Pre-Screen Tool is not a CEBA application and is solely intended to provide a non-binding indication of eligibility to inform your decision of whether to open a business account (if needed) and apply for CEBA at your financial institution. If you are declined at this step you can still apply for CEBA and therefore still need to complete the next two steps as identified.

Step 2: Businesses will initiate applications directly at their primary financial institution where they hold their primary business chequing /operating account. The financial institution will then direct applicants to Step 3 of the application process.

Step 3: Following the initial application through your financial institution, applicants will be directed to a CEBA website to provide supporting documentation of the 2020 Eligible Non-Deferrable Expenses and to complete the application.

The Government of Canada will assess application information submitted via financial institutions together with the supporting documentation and information provided in Step 3. If successful, the Government of Canada will notify your financial institution and provide funding for your CEBA loan.

Requirements for the additional $20,000 expanded loan

As of December 4, 2020, CEBA loans for eligible businesses will increase from $40,000 to $60,000.

Applicants who have received the $40,000 CEBA loan may apply for the $20,000 expansion, which provides eligible businesses with an additional $20,000 in financing directly at their bank.

All applicants have until March 31, 2021, to apply for $60,000 CEBA loan or the $20,000 expansion.

The main requirement to recieve the additional $20,000 loan is an attestation statement. This means that you would need to attest to:

  • facing ongoing financial hardship;
  • having made reasonable attempts to adapt the business to COVID-19 (and reduce expenses);
  • intention to continue the business; and
  • using the additional $20,000 for specific purposes (non-deferrable eligible expenses for 2020 or 2021).

The deadline to apply for the $20,000 expansion at your financial institution is March 31, 2021.

Collections, audit, objections and appeals: CRA and COVID-19

CRA (Canada Revenue Agency) has implemented the following changes to their procedures in regards to collections, audit, objections, and appeals due to COVID-19 as follows:

Collections

Collections activities on new debts will be suspended until further notice, and flexible payment arrangements will be available.

If you can’t pay your taxes, child and family benefit overpayments, Canada Student Loans, or other government program overpayments in full, payment arrangements are available.

Collections staff will address pre-existing situations on a case-by-case basis to prevent financial hardship.

Banks, and employers and other third parties do not need to comply or remit on existing Requirements to pay (RTP) during this time.

Audits

The CRA is resuming a full range of audit work.  They are prioritizing actions that are beneficial to the taxpayer or where taxpayers have indicated there is an urgency to advancing their audit. They focusing on higher dollar audits first, audits close to completion, and those with a strategic importance to the Government of Canada, provinces and territories, or our tax treaty partners. In addition, efforts to combat suspected fraud and other criminal activity are advancing.

New methods of taxpayer and registrant interaction will be required, and the CRA is working to develop procedures and protocols to adapt these COVID-19 health restrictions including providing taxpayers with the option to send information via e-mail.

Objections, appeals and taxpayer relief

Objections related to Canadians’ entitlement to benefits and credits have been identified as a critical service and will continue to be delivered during COVID-19. There should not be any delays with the processing of these objections.

For objections related to other tax matters filed by individuals and businesses, the CRA is currently holding these accounts in abeyance. No collection action will be taken with respect to these accounts at this time.

For objections that are due between March 18, 2020 and June 30, 2020, CRA is effectively extending the deadline to June 30, 2020.

The Tax Court of Canada is currently closed.

Taxpayers who are unable to file a return or make a payment by the tax-filing and payment deadlines because of COVID-19 can request the cancellation of penalty and interest charged to their account. Penalties and interest will not be charged if the new deadlines that the government has announced to tax-filing and payments are met.

Once business operations resume, the Taxpayer Relief Program will review requests related to COVID-19 on a priority basis.

Suspending individual (T1) validation and review activities

Some review and verification activities were initiated prior to the COVID-19 pandemic and clients may have been contacted to provide supporting information in relation to amounts claimed on their individual tax and benefit returns. If Canadians have received any CRA correspondence that includes dates for response or provision of documents for validation and verification programs, no action is required from them at this time.

COVID–19: Canada Emergency Commercial Rent Assistance (CECRA) for small businesses

The CECRA for small businesses application portal opens at 8:00 a.m. EST on May 25, 2020.

Canada Emergency Commercial Rent Assistance (CECRA) for small businesses provides relief for small businesses experiencing financial hardship due to COVID-19. It offers unsecured, forgivable loans to eligible commercial property owners to:

  • reduce the rent owed by their impacted small business tenants
  • meet operating expenses on commercial properties

Property owners must offer a minimum of a 75% rent reduction for the months of April, May and June 2020.

To qualify for CECRA for small businesses, the commercial property owner must:

  • own commercial real property* which is occupied by one or more impacted small business tenants
  • enter (or have already entered) into a legally binding rent reduction agreement for the period of April, May and June 2020, reducing an impacted small business tenant’s rent by at least 75%
  • ensure the rent reduction agreement with each impacted tenant includes:
    • a moratorium on eviction for the period during which the property owner agrees to apply the loan proceeds, and  
    • a declaration of rental revenue included in the attestation.

The commercial property owner is not and is not controlled by an individual holding federal or provincial political office.

CECRA will not apply to any federal-, provincial-, or municipal-owned properties, where the government is the landlord of the small business tenant.

Exceptions

  • Where there is a long-term lease to a First Nation, or Indigenous organization or government, the First Nation or Indigenous organization or government is eligible for CECRA for small businesses as a property owner.
  • Where there are long-term commercial leases with third parties to operate the property (for example, airports), the third party is eligible as the property owner.
  • Also eligible are post-secondary institutions, hospitals, and pension funds, as well as crown corporations with limited appropriations designated as eligible under CECRA for small businesses.

NOTE: Small businesses that opened on or after March 1, 2020 are not eligible.

* Commercial Real Property is defined as a commercial property with small business tenants. Commercial properties with a residential component and multi-unit residential mixed-use properties would equally be eligible with respect to their small business tenants.

NOTE: Properties with or without a mortgage are eligible under CECRA for small businesses.

What is an impacted small business tenant?

Impacted small business tenants are businesses — including non-profit and charitable organizations that:

  • pay no more than $50,000 in monthly gross rent per location (as defined by a valid and enforceable lease agreement)
  • generate no more than $20 million in gross annual revenues, calculated on a consolidated basis (at the ultimate parent level)
  • have experienced at least a 70% decline in pre-COVID-19 revenues **

NOTE: Eligible small business tenants who are in sub-tenancy arrangements are also eligible if these lease structures meet program criteria.

CMHC administers CECRA for small businesses on behalf of the Government of Canada.

The program offers assistance for the months of April, May and June 2020.

  • Property owners can apply later and the program will be applied retroactively.
  • Property owners may still apply for assistance once the 3-month period has ended if they can prove eligibility during those months. The end date for applications is August 31, 2020.
  • Property owners must use the funds from CECRA to refund amounts in excess of 25% paid by the small business tenant for the period or at the option of the impacted tenant apply rent paid in excess of 25% to future rent owing by the impacted tenant. ***

*** If rent has been collected at the time of approval, a credit to the tenant for a future month’s rent (i.e. July for April) is acceptable — if the tenant chooses this option. This can be a flexible 3-month period.  

The deadline to apply is August 31, 2020.

CMHC will provide forgivable loans to eligible commercial property owners. Funds will be transferred to the property owner’s financial institution.

  • The loans will cover up to 50% of the monthly gross rent owed by impacted small business tenants during the 3-month period of April, May and June 2020.
  • The property owner will be responsible for no less than half of the remaining 50% of the monthly gross rent payments (paying no less than 25% of the total).
  • The small business tenant will be responsible for no more than half of the remaining 50% of the monthly gross rent payments (paying no more than 25% of the total).

For more information, please click the following link:

https://www.cmhc-schl.gc.ca/en/finance-and-investing/covid19-cecra-small-business

COVID-19 Support for Seniors

Update: May 22, 2020

The Canadian government has announced the following support for seniors:

1. Registered Retirement Income Funds (RRIFs) minimum withdrawal reduced

The minimum withdrawals requirement from RRIFs will be reduced by 25% for 2020, in recognition of volatile market conditions and their impact on many seniors’ retirement savings.

2. One-time non-taxable payment for seniors

The payment for seniors provides support through a one-time payment:

  • $300 for seniors eligible for the Old Age Security pension, and
  • an additional $200 for seniors eligible for the Guaranteed Income Supplement

This measure will give a total of $500 to seniors who receive both the Old Age Security pension and the Guaranteed Income Supplement, and will help them cover increased costs caused by COVID-19.

Eligibility

The one-time payment for seniors is available to individuals who are eligible to receive the Old Age Security pension or the Guaranteed Income Supplement in June 2020.

How to apply

You do not have to apply. All individuals who are eligible to receive the Old Age Security pension or the Guaranteed Income Supplement in June 2020 will receive the one-time payment for seniors.

Method of payment

The one-time payment for seniors will be paid to your bank account if you are enrolled for Direct Deposit. If you are not enrolled for Direct Deposit, you will receive a cheque.

Payment amount

If you only receive the Old Age Security pension, you will receive a single payment of $300.

If you receive the Old Age Security pension and the Guaranteed Income Supplement, you will receive a single payment of $500.

If you receive the Allowance or the Allowance for the Survivor, you will receive a single payment of $500.

Spouse and common-law partner

You and your spouse or common-law partner will each receive $500 if you are both receiving the Guaranteed Income Supplement.

For couples where one partner receives the Guaranteed Income Supplement and one partner (between the age of 60 and 64) receives the Allowance, the partner receiving the Guaranteed Income Supplement will receive $500 and the partner receiving the Allowance will receive $500.

Allowance for the Survivor

Recipients of the Allowance for the Survivor will receive the $500 for the Guaranteed Income Supplement.

Non-taxable payment

The one-time payment for seniors is non-taxable. You will receive the full amount (no withholds). You will not receive a tax slip and you will not have to report this amount in your 2020 tax return.

COVID-19: Canada Emergency Student Benefit (CESB)

The Canada Emergency Student Benefit (CESB) provides financial support to post-secondary students, and recent post-secondary and high school graduates who are unable to find work due to COVID-19.

This benefit is for students who do not qualify for the Canada Emergency Response Benefit (CERB) or Employment Insurance (EI).

From May to August 2020, the CESB provides a payment to eligible students of:

$1,250       For each 4-week period

or

$2,000       For each 4-week period, if you have dependants or a disability

You can only apply for one eligibility period at a time. If your situation continues, you must re-apply for another 4-week eligibility period.

Post-secondary students

The CESB is available to eligible post-secondary students, post-secondary graduates, and students who have recently left their post-graduate studies.

You can start applying during the May 10 to June 6 eligibility period. If your situation continues, you must re-apply for another 4-week eligibility period.

Eligibility periods for post-secondary students:

  • May 10 to June 6, 2020
  • June 7 to July 4, 2020
  • July 5 to August 1, 2020
  • August 2 to August 29, 2020

Graduating high school students

The CESB is only available to eligible students who:

  • completed or expect to complete high school, or received, or expect to receive their high school equivalency in 2020
  • applied for a post-secondary educational program that starts before February 1, 2021

If you complete high school:

  • before June 7, 2020, your high school completion date must be before the start of the first eligibility period you are applying for
  • after June 7, 2020, you can only apply for 2 eligibility periods, starting from the July 5 to August 1 eligibility period

Two ways to apply:

Online – My CRA Account:

https://www.canada.ca/en/revenue-agency/services/e-services/e-services-individuals/account-individuals.html

By phone – 1-800-959-2019 or 1-800-959-2041

Before you call to verify your identity, you’ll need:

  • your Social Insurance Number (SIN); and
  • postal code

Please click the following link for more information:

https://www.canada.ca/en/revenue-agency/services/benefits/emergency-student-benefit.html

Individual Income tax filing and payment deadlines: CRA and COVID-19

The deadline for most individuals to file their 2019 taxes has been extended to June 1, 2020. The deadline to pay amounts owed has also been extended to September 1, 2020. Penalties and interest will not be charged if payments are made by the extended deadlines of September 1, 2020. This includes the late-filing penalty as long as the return is filed by September 1, 2020.

If you, your spouse, or your common-law partner are self-employed, you still have until June 15, 2020, to file your taxes. However, your payment deadline has also been extended to September 1, 2020.

For those who have to pay by instalments, the June 15, 2020, payment due date has also been extended to September 1st. Instalment penalties and interest will not be charged for this payment if it is made by the extended deadline of September 1, 2020.

For more information on the filing and payment deadline changes due to COVID-19, go to Income tax filing and payment deadlines: CRA and COVID-19.

Why file by the deadline if no payment is due until September 1?

Filing by the deadline will minimize impacts to your benefit and credit payments. If your 2019 return has not been assessed by the CRA, information from your 2018 return will be used to calculate benefit and credit payments until September 2020. That will ensure you continue to receive important payments that will help through the COVID-19 crisis. However, you may not be getting exactly the right amounts. By filing a return by the deadline, you will minimize this impact. Also, if you are owed a refund, the earlier you file, the earlier it will arrive in your pocket. By registering for direct deposit, you’ll get your refund even faster.

Coronavirus disease (COVID-19): Charities Directorate

As part of government actions taken in dealing with the effects of the COVID-19 pandemic, the Charities Directorate is extending the filing deadline to December 31, 2020, for all charities with a Form T3010, Registered Charity Information Return due between March 18, 2020 and December 31, 2020. This will allow charities more time to complete and submit their T3010, recognizing that charities will be focused on deploying their resources to address the effects of the COVID-19 virus situation.

The Charities Directorate has suspended all operations until further notice, which includes our call centre as well as all registration and audit activities. For information on operating a charity, you are encouraged to review the Charities and Giving webpage.

Charities are also encouraged to register for CRA’s secure online services. Through My Business Account, you can access the new digital services for charities.

Covid-19 10% Wage Subsidy Details for Businesses

1. What is the Temporary Wage Subsidy for Employers?

The Temporary Wage Subsidy for Employers is a three-month measure that will allow eligible employers to reduce the amount of payroll deductions required to be remitted to the Canada Revenue Agency (CRA).

2. Which employers are eligible?

You are an eligible employer if you:

  • are a non-profit organization, registered charity, or a Canadian-controlled private corporation (CCPC);
  • have an existing business number and payroll program account with the CRA on March 18, 2020; and
  • pay salary, wages, bonuses, or other remuneration to an employee.

Note: CCPCs are only eligible for the subsidy if their taxable capital employed in Canada for the preceding taxation year, calculated on an associated group basis, is less than $15 million.

The Temporary Wage Subsidy for Employers is limited to the eligible employers listed above.

3. How much is the subsidy?

The subsidy is equal to 10% of the remuneration you pay between March 18, 2020, and June 20, 2020, up to $1,375 per employee and to a maximum of $25,000 total per employer.

Associated CCPCs will not be required to share the maximum subsidy of $25,000 per employer.

For example, if you have 5 employees, the maximum subsidy you can receive is $6,875 ($1,375 x 5 employees), even though the per employer maximum is $25,000.

4. How do I calculate the subsidy?

The subsidy must be calculated manually unless your payroll program does it for you.

Here is a sample calculation to assist you:

Employee view example:

Employee Gross Wages $1,000

Less Income Tax ($300)

Less CPP ($30)

Less EI ($20)

Employee Net Pay $650

Employer source deductions tax responsibility:

Income Taxes $300

CPP – match $30

EI – match (1.4x 20) – $28

Tax liability $358

Less subsidy (10% x $1000 gross earnings)= ($100)

Adjusted Tax liability to remit – ($358-100)= $258

As this tax break is for the business, the entry required would be:

DebitTax liability $100

CreditOther Income $100 (this subsidy is confirmed to be taxable)

If you need assistance with this calculation, please reach out.

5. How will I receive the subsidy?

Once you have calculated your subsidy, you can reduce your current remittance of federal, provincial, or territorial income tax that you send to the CRA by the amount of the subsidy.Important: You cannot reduce your remittance of Canada Pension Plan contributions or Employment Insurance premiums.

For example, if you calculated a subsidy of $2,050, you would reduce your current remittance of federal, provincial, or territorial income tax by $2,050. You could continue reducing future income tax remittances, up to the maximum of $25,000, for all remuneration paid before June 20, 2020.

6. When can I start reducing remittances?

You can start reducing remittances of federal, provincial, or territorial income tax in the first remittance period that includes remuneration paid between March 18, 2020, and June 20, 2020.

For example, if you are a regular remitter, you can reduce your remittance that is due to the CRA on April 15, 2020.

7. What if subsidies exceed the remittances?

If the income taxes you deduct are not sufficient to offset the value of the subsidy in a specific period, you can reduce future remittances to benefit from the subsidy. This includes reducing remittances that may fall outside of the application period for the wage subsidy (after June 20, 2020).

For example: If you calculated a subsidy of $2,050 on remuneration paid between March 18, 2020, and June 20, 2020, but only deducted $1,050 of federal, provincial, or territorial income tax from your employees, you can reduce a future income tax remittance by $1,000, even if that remittance is in respect to remuneration paid after June 20, 2020.

8. Will the subsidy affect deductions from my employees?

No. You will continue deducting income tax, Canada Pension Plan contributions, and Employment Insurance premiums from salary, wages, bonuses, or other remuneration paid to your employees, as you currently do. The subsidy is only calculated when you remit these amounts to the CRA.

9. What if I don’t reduce remittances during the year?

If you are an eligible employer, but choose not to reduce your payroll remittances during the year, calculate the temporary wage subsidy on remuneration paid between March 18, 2020, and June 20, 2020. You can then ask for the subsidy to be paid to you at the end of the year, or transferred to the next year’s remittance.

10. What books and records do I need to support the subsidy?

You will need to keep information to support your subsidy calculation. This includes:

  • the total remuneration paid between March 18, 2020, and June 20, 2020;
  • the federal, provincial, or territorial income tax that was deducted from that remuneration; and
  • the number of employees paid in that period.

The CRA is currently updating reporting requirements. More information on how to report this subsidy will be released in the near future.

11. Is the subsidy considered taxable income?

Yes. If you receive the subsidy, you have to report the total amount as income in the year in which the subsidy is received.

12. What if my business is closed?

If you did not pay salary, wages, bonuses, or other remuneration to an employee between March 18, 2020, and June 20, 2020, you cannot receive the subsidy, even if you are an eligible employer.