Archive for the ‘CRA’ Category

COVID-19 Updates to Important Subsidy Programs

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“75%” Canada Emergency Wage Subsidy (CEWS)

The Federal government has passed into law the Canada Emergency Wage Subsidy (CEWS) as well as the 10% Temporary Wage Subsidy.  As we noted before, the CEWS provides for an amount to employers equal to 75% of employees’ remuneration paid, up to a maximum of $847 per week per employee, from March 15, 2020 to June 6, 2020.

Employers that qualify for the CEWS in one period will now automatically qualify for the NEXT claiming period.  See our April 8, 2020 Blog for the details on the revenue reduction qualification thresholds. 

It’s important to note that where an employee’s pre-crisis wages were below the threshold of $58,700 the CEWS does in fact provide a subsidy of 75% of the pre-crisis’ wages. In the event that post-crisis wages for that employee are reduced, the CEWS in effect starts to provide a subsidy that is greater than 75%. Read details of this program here.

Remember that for the employers who don’t qualify for the CEWS, the 10% Temporary Subsidy may be available to them – see our April 2, 2020 Blog.


Canada Emergency Business Account (CEBA)

An important criticism of this program was the eligibility criteria of requiring 2019 total payroll between $50,000 and $1M.  In response, the government has widened the eligibility range so that employers with payrolls in calendar 2019 of between $20,000 and $1.5M are now eligible.  The commercial banks are managing this program, and we have seen these loans be processed within about 5-7 banking days after applications were completed. Read details of this program here.


Canada Emergency Response Benefit (CERB)

On April 15, the government announced changes to the eligibility rules of this program as follows:

•    Allow people to earn up to $1,000 per month while collecting the CERB.

•    Extend the CERB to seasonal workers who have exhausted their EI regular benefits and are unable to undertake their regular seasonal work because of COVID-19.

•    Extend the CERB to workers who have recently exhausted their EI regular benefits and are unable to find a job because of COVID-19.

Read details of this program here.


National Research Council IRAP Innovation Assistance Program

This program assists start-ups during the COVID-19 crisis as follows:

•    This program is for small and medium-sized enterprises with less than 500 employees in the innovation industry. You may qualify if you are in the pre-revenue, high growth, enterprise SaaS and tech space.

•    The focus is on labour costs (i.e. salaries and benefits) with the goal of helping companies retain highly skilled labour. The scale of support is based on the number of skilled labourers.

•    There will be $250 million funding with built-in scalability components. The funding is not tied to COVID-19.

•    If you qualify for the wage subsidy and take advantage of the 75% wage subsidy, you do not qualify for this program.

•    Speaking with the ITA Advisor is required as part of the application process. Unlike the typical IRAP application, this program will not look at the tech component.

COVID-19 Support for Canadian Businesses -April 8, 2020 “75%” CEWS Update and More

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Canadian Emergency Wage Subsidy (CEWS)

On April 1, 2020 the government provided details on the 12-week wage subsidy. The subsidy is 75% of annual employee salary, up to an annual salary of $58,700 for a maximum weekly subsidy of $847. Here are some new important details.

Eligibility update

As of April 8, 2020, the CEWS subsidy will be available to eligible employers who have a gross revenue reduction of at least 15% in March 2020 and a 30% reduction in April or May 2020.

How to calculate decrease in revenue

To measure the revenue loss/reduction, the employer has two broad options:

  1. Compare the current month in 2020 to the same month in 2019; or
  2. Compare the current month in 2020 to an average of their revenue for January and February 2020.

Once you pick the method as noted above, you must stay with this method for entire period of the subsidy.

Accounting method options

Employers would be allowed to calculate their revenues under the accrual method or the cash method, but not a combination of both. Employers would select an accounting method when first applying for the CEWS and would be required to use that method for the entire duration of the program.

How much is the subsidy and who else does it apply to?

Employers will also be eligible for a subsidy of up to 75% of salaries and wages paid to new employees.

The subsidy amount for a given employee on eligible remuneration paid for the period between March 15 and June 6, 2020 would be:

Special rules apply to wages paid to non-arm’s length employees (like employers and their family members), provided they were employed prior to March 15, 2020. The subsidy will be limited to the eligible remuneration paid in any pay period between March 15 and June 6, 2020, up to a maximum benefit of:

There continues to be no overall limit on the subsidy amount that an eligible employer may claim.


You Must Apply for A My Business Account NOW!

Without this special access account, you will NOT be able to apply for this subsidy.

If you are not sure whether you have a “My Business Account”, then you probably DON’T have one. It will take an investment of time and patience but it is mandatory for the application process. Here are some helpful reminders to get you started:

  1. First, figure out whose SIN will be associated with your corporate tax accounts with the CRA – likely the person who is currently a Director and major shareholders in the business. Then gather personal information on that person – you will need the 2018 personal tax return for that person in front of you as you move through this process.
  2. Watch this video – https://www.canada.ca/en/revenue-agency/news/cra-multimedia-library/businesses-video-gallery/register-mybusiness-account.html
  3. Go to this website https://www.canada.ca/en/revenue-agency/services/e-services/e-services-businesses/business-account.html 
  4. At the bottom of that page start with “Register CRA” – in purple print .to begin the process.
  5. You cannot complete the process without receiving your security code. Regardless of what the video says about mail or e-mail options of getting this code, it ONLY comes by snail mail at this time. You will need to wait about 5-10 mailing days to obtain the security code and then you must return to the website to complete the registration process.

COVID-19 Support for Canadian Businesses

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Our understanding of the most important provision of the current relief programs is summarized below.  This information is currently as of April 1, 2020 only.


Canadian Emergency Wage Subsidy (CEWS)

On April 1st, 2020 the government provided details on the 12-week wage subsidy. The subsidy is 75% of annual employee salary, up to an annual salary of $58,700 (i.e., up to $847 per week, per eligible employee). Here are some new details:

  • The CEWS subsidy will be available for both large and small employers that have lost at least 30% of revenue due to COVID-19, regardless of the number of employees.
  • The 30% reduction will be determined by comparing the employer’s gross revenue in March, April and May, 2020 to the same month in 2019. Each month that employers experience a 30% reduction in revenue must be applied for separately.

Eligibility would generally be determined by the change in an eligible employer’s monthly revenues, year-over-year, for the calendar month in which the period began.  In determining monthly revenues, the wage subsidy would NOT be considered in revenues.

The Eligible Periods are as follows:

Each month will be a separate application.  It may be possible that a company is not eligible for Period 1, but is eligible for Periods 2 and/or 3.

  • These changes will be retroactive starting from March 15, 2020 to June 6, 2020, and there is no overall limit on the amount of subsidy than an eligible employer may claim.
  • For qualifying employers to receive funds directly from CRA, they must provide CRA the pre-crisis income and the earnings actually paid per employee.
  • Application can be made through the My Business Account CRA portal, and the new links are expected to be available next week. All employers should be certain they have a My Business Account established with the CRA – your accountant CANNOT apply for this relief for you!
  • In the meantime, businesses should ensure they are set up for direct deposit with CRA to expedite the payment process.
  • The subsidy is fully taxable.

10% Temporary Wage Subsidy

Businesses who do not qualify for the CEWS, may still qualify for the previously announced temporary three-month taxable subsidy. This subsidy is available on up to 10% of eligible employee salaries from March 18 to June 20, 2020, with a cap of $1,375 per employee and a cap of $25,000 per employer. The subsidy is fully taxable.

For employers that are eligible for both the CEWS and the 10% Temporary Wage Subsidy for a period, any benefit from the 10% wage subsidy for remuneration paid in a specific period would generally reduce the amount available to be claimed under the CEWS in that same period. In other words, eligible employers can choose to reduce remittances up to 10% of the employee’s salary and then receive the CEWS. However, they cannot be added on top of each other. The benefit is limited to 75%, not 85%.


Credit Available to Small and Medium Size Business (SMEs)

Canada Emergency Business Account

This new account will provide interest-free loans of up to $40,000 to small businesses and not-for-profits, to help cover their operating costs during a period where their revenues have been temporarily reduced. To qualify, these organizations will need to demonstrate they paid between $50,000 to $1 million in total payroll in 2019.

Loan Guarantee

Export Development Canada (EDC) is working with financial institutions to issue new operating credit and cash flow term loans of up to $6.25 million to SMEs.

Co-Lending Program

Business Development Bank of Canada (BDC) is working with financial institutions to co-lend term loans to SMEs for their operational cash flow requirements.

Eligible businesses may obtain incremental credit amounts of up to $6.25 million through the program. These programs will roll out in the three weeks after March 27.


Tax Filing and Payment Flexibility

Income Tax Extension

The government is providing the following extensions for tax deadlines.

Employer Health Tax Support for Ontarians

The Ontario government increased the Employer Health Tax exemption for 2020 from $490,000 to $1 million and have introduced a five‑month relief period for Ontario businesses who are unable to file or remit their provincial taxes on time due to the special circumstances caused by the coronavirus (COVID‑19) in Ontario. This is effective March 20, 2020.

Deferral of Sales Tax Remittance and Customs Duty Payments

The government will allow businesses, including self-employed individuals, to defer until June 30, 2020 payments of the Goods and Services Tax / Harmonized Sales Tax (GST/HST), as well as customs duties owing on their imports.

  • HST Monthly Filers – the deferral will apply to GST/HST remittances for the February, March and April 2020 reporting periods.
  • HST Quarterly Filers – the January 1, 2020 through March 31, 2020 reporting period.
  • HST Annual Filers – the amounts collected and owing for their previous fiscal year and instalments of GST/HST in respect of the filer’s current fiscal year.
  • GST and Customs Duty Payments – deferral will include amounts owing for March, April and May. These amounts were normally due to be submitted to the Canada Revenue Agency and the Canada Border Services Agency as early as the end of this month.

All HST returns must continue to be filed on time.

If you have any questions regarding any of the above information, please feel free to contact us.

Tax Season – Overcome Stress by Being Perpared!

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Yes, it’s tax season – AGAIN. Navigating the sea of life’s daily stresses can be challenging enough. What can help us cope with the added challenge of tax season? Being prepared! Here are some tips to help you get organized so you can keep a step ahead of stress.

Mark deadlines in your calendar

For individuals, the deadline is Thursday, April 30, 2020. Sole proprietors have until June 15, 2020 but, regardless of the deadline, taxes owed should be paid to CRA by April 30, 2020.  

Communicate with your accountant

Even if you think you know what documents your accountant needs to file your return, it’s worth a conversation to ensure you have not forgot something important.

For example:

  • It is vital that you disclose all sources of income. One tricky disclosure form is a T1135. If you had any foreign assets costing more than Cdn$100,000 dollars, you are required to disclose this.  Ask your investment advisor or financial institution for a T1135 report and avoid unnecessary fines.
  • If you were only partially reimbursed for dental and other claims, be sure to provide a summary from your insurance provider so your accountant can add the unclaimed portion as a medical expense. (Travel insurance can be claimed as a medical expense.)
  • Forward any donation receipts that you forgot to claim in the past 5 years. You may still be able to claim them.

Follow up on missing tax slips or receipts

  • T4 and T5 slips should be received by the first few days of March. You should expect to receive T3 slips by the end of March. If you haven’t received these slips by these times, contact your employer or financial institution asap.
  • Donation Receipts that you have not yet received for 2019 should be requested by contacting the registered charity.
  • Medical Receipts can easily be missed. There’s no need to collect all those pesky little prescription receipts. Just ask your pharmacy to provide you with a summary of all the prescriptions you paid for 2019 – it’s usually free of charge. This assures you don’t miss any!

Ensure students in a post-secondary institution file their taxes

Post-Secondary institutions issue T2202A slips that can be used against current or future taxes. Best of all, these credits are transferrable to parents at a maximum of $5,000! Students may also be eligible for additional credits such as the ON-BEN and GST/HST Credits which could mean more money in their pocket throughout the year.

Get your refund faster with direct deposit

Direct deposit ensures your refund is directly deposited into your personal bank account. All CRA needs is your Social Insurance Number, the name of your financial institution, branch/transit number and your account number. It’s super easy to set up, but if you’re unsure, ask your accountant for assistance.

Prepare ahead if you owe tax

If you expect to be paying taxes on April 30, ensure you have set aside some money to pay off your tax liability. It may be good to speak with your accountant, perhaps they can help you develop a tax plan that works for you.

Best wishes from Scarrow Yurman & Co. as you prepare to make this personal tax season the best one ever!

Curb the Clutter Crisis – Start Housekeeping Now!

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Regular housekeeping is good for us mentally, physically and emotionally – especially when managing our personal tax paperwork. How so? Well, suppose you got a notice today from CRA asking for your 2017 tax return and all supporting documentation. Would that notice send you into panic mode wondering where you put everything? It has for many taxpayers. If your paperwork is scattered from here to oblivion, now is the time to sort through the clutter. Where should you start?

Sorting Through the Madness

This can actually be fun and very liberating. Book a date with yourself and start pulling out all your files, shoe boxes, envelopes or folders and sort your tax documents by calendar year. In Canada, it is important to keep personal tax information and all supporting documents for at least 6 years, in case of the dreaded CRA review. Any older tax information can, and should, be shredded. YUP – toss it! Just think of how Zen you’ll feel without all the extra clutter. In fact, why not pass on the “Zen” by getting all last year’s documents organized and ready for your accountant.

Keep Organized Going Forward

Once you’re in a happy place with your files – follow good housekeeping habits going forward. If you think it’s easier to throw your invoices or receipts in your car, wallet, or on your desk, think again! Receipts can easily get lost, damaged or destroyed this way. Instead, best practice is to designate ONE location where you keep all personal tax documents, then deal with each document ONCE. Knowing where they are and scheduling time regularly to address each one will ensure nothing gets lost and you will stay up to date. Also, take advantage of businesses that offer e-receipts and ensure you have a file on your computer, or on the cloud, to store these as well. In fact, it’s a good idea to scan all your other receipts and keep them altogether electronically.

Hubdoc – The Housekeeping Specialist

If you’re self-employed or a small business owner with loads of receipts and supporting tax documents, you’ll want to check out Hubdoc to manage and organize your records and receipts in softcopy – liberating you from drowning in endless paperwork. 

Benefits Await You

  • Face a CRA review with confidence
  • Avoid late penalties (with CRA or other vendors)
  • Increase your tax return refund
  • Keep your accountant happy
  • Peace of mind going forward

Now’s the time to kick clutter to the curb! Get organized today and you’ll reap good housekeeping benefits now and for years to come.

Tax Loss Selling – Turn a Loss Into a tax Win!

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When it comes to investing let’s face it, you win some, you lose some. While capital gains are always the goal, sometimes selling shares incurs a loss – but is it all bad? Not when you consider the “glass half full” strategy – “Tax Loss Selling”.

What is tax loss selling?

Tax loss selling is a tax planning tool that can reduce potential tax liability by minimizing capital gains. So, if you have realized capital gains during the year, and don’t mind selling investments at a loss to help reduce your taxes, then tax loss selling is a strategy for you.

How it works

Let’s say you have two securities, ALPHA and BETA. During the year you decide to sell security ALPHA which would yield a capital gain, but you also held security BETA which underperformed and has an unrealized loss. If you sold security BETA as well, you could recognize the losses and reduce your overall capital gain, which reduce the taxes you pay.  In this way, your loss could become a win!

What else you should know

  • You (and your spouse) cannot repurchase the same shares within 30 days of the sale (that means before or after the sale). Otherwise, the CRA will consider your loss as superficial. That means the loss will be denied and added back to the cost of the newly purchased shares.
  • This selling strategy should only be considered when dealing with a non-registered portfolio.
  • If you have had gains in the previous three tax years and are expecting capital losses in the current year, you may be able to carry those losses back three years.
  • Conversely, capital losses this year may be carried forward if you are anticipating gains in the future. Capital losses can be carried forward indefinitely with no expiry.

In order to take advantage of the tax savings of this strategy, remember that December 27, 2019 is the last day to sell your shares. This is because only trades settled on or before December 31 will be considered for tax purposes. If you would like more information on tax loss selling, give us a call today and let us help you WIN at the tax game.

Cloud-Based Payroll Apps – TO THE RESCUE!

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We all enjoy getting paid. However, the process to ensure everyone gets paid accurately and on time can be a challenge. If payroll is part of your responsibilities, then you know what we’re talking about. Chained to your desk for hours, struggling to keep up with compliance rules, stressing to reach your payroll deadline and then – YIKES – you’re right out of cheques! Does this sound familiar? It might, if you’re using desktop payroll software. If you’re stuck in this vicious cycle, then cloud-based payroll apps may be the rescue remedy you need!

Set up takes minutes

Once you’ve transitioned to cloud accounting solutions, such as QuickBooks Online, it’s really becomes quite simple. A few minutes of your time setting up a payroll app today can save you BIG TIME down the road. For example, if your payroll is pretty consistent every month – it can basically run itself. Hourly employees, salaried employees, or contractors can all be set up to be paid at the same time.

Why should  you do all the work?

Most payroll apps offer similar features, some even do more than just payroll. The payroll apps outlined below allow employees to set themselves up and be responsible for their personal information. For example, they can review and access their paystubs on-line whenever they want. The apps also automatically perform payroll calculations and update the latest tax tables which takes the pressure off you! Here are some other liberating features:

  • Direct deposit – No more cheques required!
  • Automatic payroll calculations – No more tedious number cruching!
  • Online paystubs – Help save the environment!
  • CRA/WCB Remittances – Ensures you’re compliant!
  • Records of Employment – Off-boarding made easy!
  • Year end T4/T4As – The app prepares these, not you!

So, if you’re interested in breaking free and saying good-bye to the old-school approach to payroll, call us today. We’ll help you get current, get organized, and save you the precious time you need to focus on growing your business.

Goodbye “Old School” Data Entry – Hello Hubdoc!

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Are you up to your eyeballs keeping track of receipts, invoices and bank statements? Business owners know that the CRA requires these supporting documents to be in order in the event of an audit. However, the time it takes to gather and input all this information throughout the year can seem daunting! We feel your pain and want to share a more efficient way to keep track of these necessary documents.

Introducing: Hubdoc! Hubdoc is a cloud-based software that helps you collect, manage and organize receipts, invoices and statements seamlessly. Here’s how it works:

  • Hubdoc automatically fetches the latest monthly bank and credit card statements from all major banks. It can also fetch monthly bills from a growing list of vendors. (Yes, it’s that helpful!)
  • Hubdoc keeps a digital backup of your receipts and invoices in one central location. These can be easily submitted to Hubdoc through automatic fetch, email forwarding, scanning or just taking a picture through their mobile app. (Yes, it’s that easy!)
  • Using machine learning technology, Hubdoc extracts key information such as vendor name, dates and dollar amounts from your uploaded documents. (Yes, it’s that smart!)
  • Hubdoc integrates with QuickBooks Online which can help you automate your bookkeeping. With a click of a button, you can export the extracted data from Hubdoc and automatically create a transaction in QuickBooks Online. (Yes, it’s that automated!)

Using Hubdoc to automate your data entry and bookkeeping chores will leave you valuable time to focus on expanding your business. To refresh your memory about Cloud Accounting, please refer to our June 2019 blog. To find out if Hubdoc is right for you, contact us anytime. Say goodbye to old school headaches and say hello to Hubdoc!

Should You Steer Clear of Company Owned Vehicles?

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It depends on how much business driving you do. In cases where business use is minimal, a company owned vehicle is simply a tax nightmare.

The Bumpy Ride from Phantom Income

On company owned vehicles, CRA imputes phantom income to the employee as follows:

  • Standby Charges – Calculated with reference to the purchase price of the vehicle (if owned) or the manufacturer’s suggested retail price (MSRP) for a leased vehicle.
  • Operating Cost Benefit – Calculated in relation to the company paid outlays like gas, repairs and insurance, etc.

In either case, you must include this phantom income depending on the extent to which the vehicle is used for business purposes.  If you don’t drive more than 1,000 KM per month on business AND have more than 50% personal use, the standby charge is a big number – the more expensive the car, the bigger the number gets.  The kicker is, as your car depreciates each year, the standby charge income stays high based on the original price you paid (or MSRP, if leased).

A Typical Road Travelled

Consider a typical scenario. A vehicle costing the company $40,000 is used 365 days a year by an employee (maybe the owner) who drives it to and from work (which is NOT business use) for a total of 30,000 personal KM a year.  The automobile benefit for this employee is $18,000 each year.  This amount is taxed at the same rate as salary and must be included on the employee’s T4.  If the automobile is used for five years, the benefit will remain at $18,000 even though the vehicle is depreciating over time. Over five years there would be $90,000 reported on this employee’s T4, even though the original cost of the vehicle was only $40,000!

Driving the Point Home

If you want to reduce the standby charges and operating cost benefit because you believe you are using your vehicle a lot for business purposes, buckle up for a tough drive! CRA requires you to maintain an accurate mileage log as proof of the percentage you use your vehicle for business. Also, if your phantom income is not reported properly, a CRA audit is sure to ensue, along with penalties and interest – we see this all the time!

The bottom line to our opening scenario, is that it makes better sense for the employee to buy the vehicle and ask for a tax-free mileage reimbursement for business KM’s driven at CRA’s allowed per KM rate.  No T4 implications, no phantom income, no complex reporting, no hassle. They simply keep track of the few business KM’s to support their expense claim. Done and done!

If you’re contemplating a business vehicle, we suggest giving us a call to discuss the tax implications. In the meantime, use this Automobile Benefits Online Calculator and start steering yourself in the right direction today.  https://apps.cra-arc.gc.ca/ebci/rhac/prot/ntr.action

Seniors – The Good, The Bad, and The Blogs

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So, you’ve finally entered your “golden years”. It’s a time to enjoy the perks of turning 65 – senior’s days, passes and discounts. You now have more time to spend either with your family, in your garden, or mastering what was once only a hobby. To be realistic though, it’s not all golden.

Among other things, changes in health, technology and finances can add an element of stress that can easily tarnish your golden years. For example, financial predators prey on the trusting nature of seniors and view them as easy targets. Also, declining health coupled with rising healthcare costs can impact your retirement budget. These and other challenges can lead to frustration and stress – something we’d all like to minimize!

How can you minimize health care costs, keep up with technology risks, and keep one step ahead of financial predators? At Scarrow Yurman & Co., we empathize with your struggles and regularly provide timely support for seniors’ issues in our monthly blogs. Below are some of our past blogs that you may remember.

Disability Tax Credit – Are You Eligible?

Travel Expenses for Medical Expense

Medical Expenses

Fraud – It’s Rampant

Passwords Made Easy

CRA / IFRS Fraud Alert – Part 1

CRA / IFRS Fraud Alert – Part 2

Cyberattacks – Are You at Risk

We appreciate our seniors and benefit greatly from their wisdom and experience. To continue to give back to our senior community, we invite you tell us what other related topics you’d like us to blog about. Proactively keeping informed can help minimize stress and puts you in a good position to enjoy your retirement. So let us help you, and go for the gold!

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