Archive for the ‘CRA’ Category

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!

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!

Canadian Emergency Wage Subsidy (CEWS) – Further Extension Announced

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The Canadian government has announced an extension to the CEWS subsidy. Eligible employers will now be able to claim this subsidy until December 19, 2020. We thought it appropriate to give you a heads up as they have also announced proposed changes to the CEWS as follows:

  • Starting with the July 5 to August 1 reporting period (Period 5), new rules will be in place to allow for possible eligibility to employers who previously did not meet the 30% revenue reduction threshold.
  • The previous CEWS subsidy will be replaced with a two-part subsidy. There will be a “base” amount and a “top-up” amount. The top-up amount will apply to employers who are experiencing a 50% or greater revenue decline.
  • Under the new rules, the amount of the wage subsidy an eligible employer could qualify for would vary depending on their revenue decline. Where the revenue decline is less than 30%, the subsidy falls in proportion.
  • Interestingly, this proposal included an option for employers to apply under the previous rule for July and August (Periods 5 and 6) should the amount of the CEWS subsidy received result in a larger amount under the old rules compared to the new rules. 
  • New continuity rules are in place for employers that have recently purchased assets of a business.
  • There will be a CEWS appeal process and an extension to the subsidy application deadline.
  • The legislative proposals also include previously announced measures for the subsidy affecting employers with a paymaster arrangement, amalgamated corporations, tax exempt trusts, and seasonal employees.
  • The draft legislation further includes previously tabled measures to allow the government to temporarily extend or suspend certain federal statutory deadlines and time limits (i.e. tax filing and payment deadlines) up to December 31, 2020.

Clear as mud? Based on our first read through the new rules, they are by far more complex than what we had before, but ultimately perhaps “fairer”. We are going to need time to fully absorb how all of this works and will be issuing additional guidance when we feel we understand this better.

In terms of urgency and timing, we are presently in Period 5 of the subsidy which ends August 1, so no applications for Period 5 can be processed until after that time. Until then, we will monitor any updates and do our best to keep you posted as things are clarified by the Government of Canada.

COVID-19 Home Office Expenses – What You Need to Know

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COVID-19 has resulted in many learning curves for 2020. For example, some of us are working from home for the first time. So, it’s not surprising that we’ve been asked by many clients if and how they can claim home office expenses.

As you would imagine, it’s tricky. Here’s what you need to know.

Definition of home office space

First, you must meet the qualifications of a home office space according to the Government of Canada, which is that it must be:

  1. Used principally (“principally” meaning “more than 50% of the time”) for the performance of office or employment duties. It can be any place in the home such as a kitchen or dining room, OR
  2. Used exclusively during the period to which the expenses relate, to earn employment income, and on a regular and continuous basis, used for meeting clients* or other persons in the ordinary course of performing the employment duties.

*It is the CRA’s view that “ ‘meeting customers or other persons’ as used in subsection 8(13) of the Income Tax Act includes only face to face encounters”. That said, we believe that video calls and phone calls constitute a “meeting” with clients in the context of the work-at-home COVID-19 scenario.

Employer responsibility

Once you have determined that you qualify, your employer must provide a signed T2200 Condition of Employment form which outlines the type of expenses that can be claimed as part of the employment contract.  

What you can claim

It starts to get tricky at this point. Here are some of the more common expenses incurred while working from home – but as you see – not all are claimable expenses. (Due to the pandemic, we will not cover expenses related to meals, entertainment, and travel costs). 

How much of the “Home expenses” you can claim 

Now you will need to calculate the proportionate business usage. There is no specific rule, it can be based on either:

  • Square footage of the workspace as a percentage of the overall square footage of the home; OR
  • Calculated based on business hours used as a percentage of total hours for mixed used home office. For example, if the business hours are 9:00 am to 5:30 pm for five days a week for 36 weeks, the business usage for year 2020 would be 15.45% (37.50/ 168 hours per week x 36/52 weeks).  

Whatever approach you choose, it must be reasonable. You must also be able to provide CRA your supporting documentation (such as the workspace home floor plan and bills) if they should ask. In addition, the home office expense deduction is limited to the amount of employment income.  Any unused deductions (although unlikely) can be carried forward and deducted against future employment income.   

Special COVID-19 reimbursement for 2020

To assist the transition to home office, CRA allows a special rule for an employee to receive up to $500 for a reimbursement from the employer for the purchase of a computer used primarily for the benefit of the employer.  This reimbursement is not taxable to the employee.   

We hope this blog has helped flattened the learning curve as you get yourself organized to work from home. If you need any more information, don’t hesitate to give us a call.


Disclaimer: Information is based on existing tax law as at July 2020, subject to CRA changes/updates on claiming any home office expenses.    

Finding Your Money in Unexpected Places

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Most of us are guilty of shoving cash in our pant’s pockets, purses or jackets and then totally forgetting about it. Then, one day we put on a pair of jeans we have not wore in a while and “voila” – 20 bucks we forgot about. NICE! Finding money unexpectedly, regardless of the amount, is one of life’s simple pleasures.

This year we learned of another way you could find more of your lost money, and it may surprise you! Each year the Government of Canada issues payments to Canadians in the form of refunds, credits, or benefits. Believe it or not, some of these payments have gone uncashed by Canadians! Some may have been lost, stolen or in some other way just have never made it to you. In fact, according to the Government of Canada’s website:

“As of May 2019, approximately 5 million Canadians had an estimated 7.6 million uncashed cheques with the Canada Revenue Agency (CRA), dating back to 1998.”

Are you one of those Canadians with an unclaimed refund? Find out today by checking out the new “Uncashed Cheque” feature that the Government of Canada introduced in February 2020. To search for your “lost treasure”, you will need to open “My Account for Individuals” with CRA. CRA has excellent on-line guidance on how to set up your personal account. If you do have an uncashed cheque waiting for you, you are allowed to request a reissued payment from My Account. From My Account, you will find the option to apply in the right menu bar (see example).

Going forward, here are a couple easy ways to ensure you never miss a refund:

Our best wishes as you search and perhaps find all that is yours!

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!

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