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Canada Emergency Wage Subsidy – Dec 2020 Update

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IMPORTANT CEWS Update

The Canada Emergency Wage Subsidy, commonly known as “CEWS” has been a lifeline to many businesses. With payroll being one of the largest costs for Canadian businesses, the federal government introduced this subsidy at the beginning of the COVID-19 Pandemic.

As businesses continuing to struggle from the first wave of the pandemic and into the second, the federal government extended the much needed wage subsidy into June 2021.

Don’t Miss out – last chance to Apply:

The hard deadline to apply for CEWS for periods 1 through periods 5 (essentially claim periods in March through August) is JANUARY 31, 2021.

As the months roll forward, the deadline rolls as well.  For example, to claim for Period 6, applications needs to be submitted by end of February 2021, and so on.

Rules Changes:

Based on recent announcements, for periods 8-10 (September 27 to December 19, 2020), the declining subsidy approach has been abandoned.  Instead, the maximum subsidy will remain at 65% (40% base and 25% top-up for hard-hit businesses) of eligible wages. The government has also simplified the required reduction in revenue measurement.

Another important change is the increase in the maximum CEWS from 65% to 75% of the eligible wages   for the periods beginning December 20, 2020 through March 13, 2021 (periods 11 to 13). The breakdown of the 75% is not yet available.

When the subsidy was first introduced, there were many questions on how to handle the calculation of baseline remuneration for employees on leave of absence. The updated guidelines now include the last 90 days pay for these employees that were on long-term leave between July 1, 2019 and March 15, 2020 to be used in arriving at the baseline remuneration. This is retroactive to period 5.

Stay tuned to our blogs for all the latest news.

Canada Emergency Rent Subsidy

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On November 23, 2020, the government has provided details on the new Canada Emergency Rent Subsidy (CERS). This new subsidy program provides relief to qualifying entities who were negatively affected by COVID-19.

The CERS covers up to a maximum 65% of eligible expenses if your business has experienced a revenue drop of at least 70%. Even if your revenue drop is less than 70%, you may still qualify for a decreased version of CERS depending on how much your revenue has dropped. Also, if your business was forced to shut down due to mandatory public health orders, then the benefits you receive from the subsidy also increases.

Here are some important details about the program:

Eligibility

To qualify, you must have experienced a drop in revenue, have eligible expenses (explained below) and meet one of the following conditions:

  1. You had a CRA business number on September 27, 2020. OR
  2. You had a payroll account on March 15, 2020. OR
  3. You purchased the practice or business assets of another entity who meets the above conditions.

Despite its name, the subsidy also applies to entities that own their business location. The owned or rented property must be used primarily for your ordinary business activities. Properties that are used to primarily earn rental income do not qualify for this subsidy.

Revenue drop

Like the Canada Emergency Wage Subsidy (CEWS), the rate your revenue has dropped determines how much you receive for that period. Your drop in revenue is calculated by comparing your reference period revenue to the baseline revenue amount. Below are the first 3 claim periods

PeriodClaim periodApplication start dateReference period revenueBaseline revenue
1September 27 to October 24, 2020NowOctober 2020October 2019 OR
Average of January and February 2020
2October 25 to November 21, 2020November 30, 2020November 2020November 2019 OR
Average of January and February 2020
3November 22 to December 19, 2020December 23, 2020December 2020October 2019 OR
Average of January and February 2020

Once you have determined your revenue drop, you can then calculate your subsidy rate as below.

Your revenue dropHow to calculate your rate
Revenue drop of 70% or moreMaximum subsidy rate of 65%
Revenue drop of 50% to 70%(Revenue drop – 50%) x 1.25 + 40%
Revenue drop of less than 50%Revenue drop x 0.8

The subsidy amount is determined by multiplying the subsidy rate against total eligible expenses.

Eligible expenses

Eligible expenses are amount paid or payable in a claim period and it can be expenses such as

  • Rent
  • TMI/CAM (if applicable)
  • Property taxes
  • Insurance
  • Interest on commercial mortgage

Lockdown support

If you qualify for CERS and your business location is temporarily closed or have activities significantly restricted for a week or longer due to COVID-19 related public health order, then you may qualify for the lockdown support. The lockdown support provides an additional 25% on top of the base subsidy rate.

Please do not hesitate to give us a call if you have any questions or would like assistance with your CERS application. Our experienced SYC team is here to help!

2020 – The Best Tax Loss Selling Opportunity In Years

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What is tax loss selling anyway?

Tax loss selling is a strategy to reduce tax by triggering capital losses now and using them against capital gains. If you have realized capital gains this year, in any of the past 3 tax years or expect to realize gains in the near future, this strategy can help reduce your tax.  In a best-case scenario, it can mean triggering a refund cheque from the CRA!

To take advantage of this strategy you must sell a capital property at a loss. The most popular target for this is the proverbial “stock I never should have bought”. The target stock is trading well below the price you paid, and you see no upside in the near future. While it might be a tough thing to let go, the tax savings might be the push you need to finally dump that loser.  Let’s illustrate an example below.

This is how it works in practice

You own two securities, Charlie and Romeo.  Charlie has been a loser since you took an interest in it (you are down $15,000 from where you bought), but you have hung on to it in the hopes it will come back up. Romeo has done well (it is up $20,000 from where you bought), and you have sold Romeo at a gain to lock in the profits. The following shows the tax outcomes of selling just Romeo or taking it a step further and doing the tax loss sale of Charlie as well.

Realized Capital Gain RomeoRealized Capital Loss CharlieNet Capital GainTax Owing*
Sell Romeo only20,000020,0005,356
Sell Charlie and Romeo20,000(15,000)5,0001,339
*assuming highest tax bracket (Taxable income above 220,000) and Ontario residency.

As you can see tax-loss selling can result in significantly reduced capital gains taxes – about $4,000 in this illustration.

With all the market volatility this past year, there may be positions that you hold in your portfolio that will make good candidates for tax loss selling.  But read on – you need to BE CAREFUL.

Important considerations

  • You cannot purchase the loss shares (or a right to acquire the loss shares) during the period that begins 30 days prior to the sale or repurchase the loss shares for 30 days after the sale. If you break this rule, the CRA will deny the loss as a “superficial loss” (no tax savings for you!) and the loss will be added to the ACB of the shares purchased and no immediate benefit will be obtained.
  • Tax loss selling only works on non-registered portfolios, capital gains and losses in registered portfolios are not relevant to your tax return.
  • In order to take advantage of this tax strategy, the tax loss sale must settle in the current tax year –check with your investment advisor to ensure trades are settled on or before December 31, 2020.
  • Take a look now at your portfolios and see if there is any potential to take advantage of this great tax strategy!

Canada Government Subsidy News For Businesses

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On October 9, 2020, the Canadian government announced its intention to introduce new, targeted supports to help hard-hit businesses cope with the affects of the pandemic. It is hoped that this support will assist businesses navigate through the second wave and end up in a good position for a strong recovery.

NEW: Canada Emergency Rent Subsidy

This subsidy is designed to essentially replace the failed existing program on rent relief. It allows the tenant to apply and will hopefully provide simple and easy-to-access rent and mortgage support until June 2021 for qualifying organizations affected by COVID-19. Please read some of the highlights here.

EXPANDED: Canada Emergency Business Account (CEBA)

Canada Emergency Business Account (CEBA) has also been expanded. The highlights are that eligible businesses would be able to access the CEBA interest-free loan of up to $20,000, in addition to the original CEBA loan of $40,000. The deadline for CEBA has also been extended to December 31, 2020. Further details, including the launch date and application process will be announced in the coming days. We will keep you updated as things are rolled out.

5 Ways That Lead to $avings

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“Do not save what is left after spending but spend what is left after saving.”

– Warren Buffett

An interesting quote indeed! It actually makes a lot of sense. Life can be hectic, and when we’re tired and busy it’s easy to make decisions about money far too quickly. However, taking a step back before we spend allows us time to weigh our options and make better financial decisions. This investment of time can lead to impressive savings.

Even the simplest of strategies can reap large saving rewards. We’ve put together 5 simple things you can do NOW to help you save your money.

Know Where Your Money is Going

If you don’t have a budget, make one – budgets work and there are plenty of Apps to assist you. If you already have a budget – do you look at it? REALLY look at it? Knowing how much money you actually have and where your money is going can be a wake-up call. Get the family involved. Budgeting and the value of money are good life lessons for the next generation.

Before You Spend, Ask Yourself:

  • Do I need this? If your budget shocks you, try defining your needs from your wants. Be honest! Keeping nonessentials to a minimum can help your cash flow and protect your savings. Run the numbers and see for yourself.
  • Do I have the best deal? Whether its insurance premiums, cable, or phone plans, make it a habit to know what deals your providers are offering compared to their competitors. Don’t be shy to call your provider to let them know you’re not happy with what your paying. You may be surprised at what they might offer you. If they are not willing to budge, don’t be afraid to take your business elsewhere if you find a better deal – every little bit you save adds up over a year.
  • Is this the best price? Take advantage of coupons. If you cringe at the idea of cutting coupons and flipping through flyers – then don’t! Truth is, it’s never been easier to know where the deals are. For example, if you use an app like FLIPP, you can search for the exact item you want, find the best price, and know where to get it – in seconds. A good motto is never to pay full price for anything, when possible!

Boost Your Cash Flow

Most of us are at home far more than usual this year. Now may be the best time to look around the house and make a list of items you haven’t used in over a year (i.e. furniture, appliances, tools, etc.). Ask yourself “Do I really need this”? If not, sell it! It’s money in your pocket and could fill a need for someone else who is trying to save money.

Are there any memberships you don’t use anymore? For example, hanging on to a gym membership in the hopes that “one day” you’ll use it does not keep you in shape physically or financially.

Also, review your credit card cash back and points plans. Perhaps you can convert reward points from credit cards, Air Miles, or Aeroplan into cash or gift cards. Bottom line is, if your points plans aren’t really benefitting you, maybe it’s time to investigate other options.

Take Control of Debt

COVID-19 has made paying our bills more challenging than ever. Now is a great time to renegotiate debt. Call your bank to see if you can get a cheaper interest rate, or if there is a way to consolidate debt that makes sense for you.

Develop a Savings Plan

Have definite savings goals. Decide on a percent to save for both long-term goals like retirement, mid-term goals like a house, or short-term goals like your dream vacation. Also, don’t forget an emergency fund. Once you have a savings plan, commit to it and ensure your money is somewhere that you cannot see it or touch it until you really need to.

While these suggestions are a great place to start, there are many other ways to save money. Don’t put it off – ACT NOW and call us today. We’ll do our best to understand where you’re at and inform you of other options you may never have considered before.  

Canadian Emergency Wage Subsidy (CEWS) – UPDATE

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If you still have questions about the Canadian Emergency Wage Subsidy (CEWS) – you’re not alone. We’ve scratched our heads a few times too!

For the first sixteen weeks (Periods 1-4), eligible employers that saw a drop of at least 15% of their qualifying revenue qualifying revenue in March 2020 and 30% for the following months of April, May and June, when compared to their qualifying revenue for the same period in 2019 (or the average of January and February 2020), qualified for the wage subsidy.

However, things changed dramatically starting in Period 5. For the following twenty weeks (Periods 5-9) the wage subsidy has been modified to include ALL eligible employers that experience ANY decline in revenue for a claim period.

Just to recap, CEWS applies to you if your business:

1)    Experienced a decline in revenue when comparing the current or previous month to either:

  • the same month in 2019 (based on revenue recognized or cash received);

OR

  • an average of January and February 2020 (based on revenue recognized or cash received).

2)    Has at least one employee (arm’s-length or non-arm’s-length).

3)    Had a CRA payroll account on March 15, 2020.

Please don’t hesitate to give us a call if you have any questions or would like assistance with your CEWS application. Our experienced SYC team is here to help!

Wills & Estates – What’s Your Legacy Plan?

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It’s been said that nothing is as certain as death and taxes. As CPA’s we might add another certainty – tax implications after your death. However, being aware of the inevitable does not automatically prepare us for the inevitable.

Our experience has taught us that the legacy people leave for their loved ones can either be fair, sensible, and considerate; or one that results in confusion, confrontation, and chaos. What makes the difference? A desirable legacy plan starts with being accurately informed of your options and then taking the necessary steps to prepare a legally binding arrangement – before the unavoidable happens.

Being accurately informed first involves understanding the “lingo”. Many of us have heard terms like “Wills, Executors, Trustees and Estates”, but what do they all mean exactly? Here is a brief breakdown.

Wills

A Will sets out your wishes regarding all your belongings after your demise. There are many reasons why people hesitate to write their Wills. If something has been holding you back, think of what a Will accomplishes:

  • Safeguards guardianship for your beneficiaries of your most valuable belongings
  • Outlines your wishes, which takes some pressure off your already grieving family
  • Ensures specific people receive what you choose from your assets
  • Protects your business interests
  • Makes sure donations go to charities dear to your heart
  • And a lot more (Consulting a lawyer is also a MUST DO step)

It’s good to review your Will every 3-5 years. That said, while a Will is valuable, it works in harmony with many other important legal documents. However, a Will only controls what happens to assets that flow into your estate (i.e. assets not held jointly with another person who has rights of survivorship; insurance policies, registered accounts, and pension plan benefits without named beneficiaries, etc.).

Estates

Your Estate is the collection of assets and liabilities that legally flow under the terms of your Will into what amounts to a newly created separate entity.  That separate entity, called your Estate, is a separate taxpayer under our tax laws and has the obligation to follow the instructions contained in your Will, as carried out by your “Executor/Executrix”.  The Estate can be in existence for many years, or a short time depending on the instructions in your Will.  Choosing an Executor of your Will (who becomes the Trustee of your Estate) is likely one of the most important decisions you make in drawing up your Will.  Picking your best friend is often a first-choice, but it may not be the best idea. Think about this, if you pass at the ripe old age of 93 and your best friend is also older, leaving them this important and demanding job could be very stressful for them. It’s good to think carefully and discuss the implications frankly with the individual you are thinking of selecting.

Estate Plans

A common misconception is that Estate Plans are only for the extremely wealthy. If you own a car, a house, and have bank accounts – then you could benefit from an Estate Plan. It’s especially important to have an Estate Plan if you own a business, have minor children, have assets in foreign countries, or have any concerns that your Will may be contested by a relative, business associate, or a previous life partner.

An Estate Plan not only assures your assets are distributed with maximum tax benefits to the beneficiaries after your death but can also outline how to deal with your needs while you are still alive. For example, if because of health conditions you are unable to speak for yourself or make sound decisions, your Estate Plan can include a Power of Attorney or Living Will which speak for you or designate others to make decisions on your behalf.

An Estate Plan includes (among other things):

  • Your Last Will and Testament
  • Beneficiary designations – registered accounts
  • Transfers of property or financial assets (before death or under the terms of your Will)
  • Power of Attorney for Property (designated individual to take care of your finances)
  • Power of Attorney for Personal Care (designated individual to make medical decisions on your behalf)
  •  A “Living Will” (your written request regarding life-prolonging treatments)

This blog is meant clarify things, but this is not the entire story.  The easy part is understanding the “lingo”. The challenging part is implementing a plan as there are lots of critical decisions to be made. That’s where the professionals at SYC can help. We have used our knowledge and experience to help clients with Estate Plans for decades. We can work with you and your legal counsel to create a legacy plan that will give you peace of mind now and enable those you care about to remember you with fondness for years to come.

Retirement Planning – Be Future Ready!

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Contrary to popular belief, retirement planning should begin as soon as you start working. However, even if you are middle-aged or older, it’s never too late to start taking control of this important planning.

2020 is a sobering reminder of how unsettling not being prepared can feel. While we cannot prepare for everything life throws at us, there is much that is in our control. Retirement planning is a good example.

Here are some simple, yet important, questions to think about now as you plan for your retirement:

What is your retirement vision? Have you set goals?

  • What will you do with your new freedom?  Have you thought of short-term or long-term goals? Do you have a dream list? 
  • If you want to semi-retire, what part-time work makes sense for you? How much extra income would you like, or need, to make?
  • What post-retirement responsibilities will you have? Will you be supporting children, aging parents, or other family members?

Now for the elephant in the room: “How much money will you need?”

  • Consider your current lifestyle. What are your ACTUAL expenses monthly and annually? If you’re uncertain, start tracking them now – you may be surprised.
  • When budgeting, don’t forget the details – everything from vacations, to car purchases, to clothing.
  • Factor in inflation. 2020 is a good example of how prices rise each year.
  • Scope out big family events – upcoming weddings, anniversaries, etc.
  • Plan for unexpected costs, such as dental work, home and car repair, etc.
  • How is your present health? How long do you expect to live?

What will be your sources of income?

  • Consider whether you will be eligible for CPP, OAS, or employer-sponsored pension.
  • Review your existing investment portfolio such as RRSP/RRIF, TFSA, non-registered investment accounts and personal savings. Maximize savings now by investing early to take advantage of compound earnings.
  • If you are a business owner, how long will you be able to draw salaries or dividends from your corporation?

Tax planning questions

  • How can you minimize taxes during your retirement? Are your investments and other sources of income structured in the most tax-efficient manner?
  • Do you understand the differences between an RRSP, RRIF and TFSA, as well as their tax treatment in retirement?
  • When should you apply for benefits under CPP and OAS? Keep in mind, the age you start to receive CPP benefits will impact the amount of payment you will receive.
  • Are there specialized tax credits or tax planning available upon retirement?  For example, depending on your situation, you may be able to share CPP and split pension income with your spouse.

Wondering where to start, or how to move forward?

Feeling confused is totally understandable! During this COVID crisis investment portfolios were severely impacted, but then bounced back strongly. Many who had plans to retire may have decided to postpone their plan, while others were forced into retirement due to layoffs. Other Canadians are simply not ready because of large debts, or insufficient savings. Even Canadians who have been diligent savers simply don’t know where to begin when it comes to retirement planning.

Have no fear – SYC is here! We have been providing retirement planning services for years. So if your goal is to be “future ready”, don’t delay! Call one of our team members and take the first step.

HEADS UP – CEWS Eligibility Has Been Expanded!

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As we mentioned in our July blog, the Canadian government recently extended the CEWS subsidy program until December 19, 2020. Along with the extension, they have dramatically expanded the eligibility requirement for the subsidy. Employers who have not qualified in the past may now be eligible under the new requirements.

Eligibility Update

The latest eligibility rules remove the 30% revenue reduction threshold requirement. This means that any employer that is experiencing a revenue reduction may now qualify for the subsidy even if the reduction is less than 30%. Before you begin calculating, please remember:

  • The CEWS subsidy application is done separately each month and the revenue reduction must be determined each time.
  • Revenue reduction is determined by comparing the monthly revenue for the subsidy period to a number of other data points and this is what provides more complexity, but more opportunity as well.

If you think you may qualify for the CEWS subsidy program under the new requirements, please contact us and we will be happy to assist you.

Income Tax Payment Deadlines Extended AGAIN!

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The New Payment Deadline is now September 30, 2020!

The CRA initially extended the payment deadlines for individual, corporate and trust income tax returns to September 1, 2020. The CRA has now extended the payment deadlines once again to September 30, 2020.

That means the CRA will waive any late filing penalties and interest for returns filed after their normal filing deadline – as long as you file the return and pay the taxes owing the return by September 30, 2020. This includes any elections, forms and schedules that are to be filed with the return (i.e. T106, T1135).

The CRA is also waiving any arrears interest on existing tax debts related to individual, corporate, and trust tax returns from April 1, 2020 to September 30, 2020. For GST/HST returns from April 1, 2020, to June 30, 2020. (NOTE: This does not include penalties and interest incurred prior to this period.)

In the case of financial difficulties, it’s still important to file the return by September 30 to avoid an additional 5% late filing penalty on top of what you may already owe. In fact, the CRA is still encouraging Canadians to file their income tax returns as soon as possible even though the deadlines have been extended. We agree! Let’s get this done!

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