COVID Tax Programs - February 2021 Update
A Note On Bookkeeping and COVID Programs for Business
The two most significant programs right now are the Canada Emergency Wage Subsidy (CEWS) and the Canada Emergency Rent Subsidy (CERS). Both require you to maintain up to date bookkeeping, specifically on the Revenue side. If your business is one that generally does bookkeeping once a year, please pay attention to the deadlines for applying for these programs because you may be out of luck if you miss the applications because of bookkeeping not being up to date. If you require our support to apply for these programs, please reach out as soon as possible to ensure we can schedule in your bookkeeping.
As we wait for vaccines, the government is in the process of extending support programs for individuals and businesses, but at this point it does not look like any new programs are in the horizon. However, with an upcoming budget (and maybe even an election), this all could change.
Here are a few items to be aware of:
Curious what you may qualify for? Try this website from Canada to help people navigate the various programs. https://covid-benefits.alpha.canada.ca/en/start
NEW! Home Office Expenses (for Employees) - Were you required to work from home in 2020? If so, there are three ways you can make a claim for your personal tax returns. (You can read our blog post here - https://www.smllp.ca/blog/2020-work-home). CRA also has a useful resource here to review - https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/about-your-tax-return/tax-return/completing-a-tax-return/deductions-credits-expenses/line-229-other-employment-expenses/work-space-home-expenses.html
- Temporary Flat Rate Method - This method allows you to claim $2 for each day you worked from home in 2020 due to the COVID-19 pandemic, up to a maximum of $400. Note that you have to be able to document / prove the number of days.
- Detailed method - you can claim the actual amounts you paid, supported by documents, but you can only claim based on the percentage of the home you are using. You will require a form T2200S or T2200 from your employer. Note that many expenses are not claimable - ie. mortgage interest and capital expenses, but many are such as a portion of utilities, property tax, rent, internet.
Which method is best for you depends on your specific situation.
CRA Audits / Audit Shield - At this time it is not clear what CRA audits will look like for any of the programs but if you applied for CEWS or CERS we STRONGLY encourage our clients to purchase our AUDIT SHIELD when renewals come out shortly. This will cover up to $10,000 in fees for many CRA Audits, but note that exceptions do apply - most important is CEWS, for it will cover a post payment review of CEWS as it appears in that filing. This includes Trust Examinations of a filed T4, Company Limited Reviews looking to validate CEWS entitlement, or any other review and audit based around a filing of a tax return (assuming no penalties are applied by CRA).
CERB - Did you receive CERB? You should be receiving a T4A slip reporting the amounts you received. Note that if you paid any back in 2021, you will be getting the deduction in next year's tax filing not the current year.
NEW! Highly Affected Sectors Credit Availability Program (HASCAP) - The Highly Affected Sectors Credit Availability Program (HASCAP) provides businesses heavily impacted by COVID-19, access to guaranteed, low-interest loans of $25,000 to $1 million to cover operational cash flow needs. HASCAP is available to businesses that operate in sectors such as tourism and hospitality, restaurants and those that primarily rely on in-person services. - https://www.bdc.ca/en/special-support/hascap?ref=shorturl-hascap
NEW! BC Small and Middle Size Business Recovery Grant Program (expires March 31), provides $10,000 to $30,000 to small and medium sized B.C. businesses impacted by COVID-19. An additional $5,000 to $15,000 grant is available to eligible tourism-related businesses. If you’re eligible, you’ll be asked to develop a recovery plan. Professional service providers are available to help businesses with the recovery plan as needed. More information is available in the application. Once your recovery plan is submitted and reviewed, approved businesses will receive grant funding for their plan. Note, our firm is approved by Small Business BC to help with your plan. Read more here - https://www2.gov.bc.ca/gov/content/economic-recovery/business-recovery-grant
NEW! Income Supports (CRCB, CRSB, CRB, EI) - The number of weeks one can qualify for have been extended. For example, one can now qualify for 50 weeks of EI opposed to the original 26 weeks.
Canada Emergency Wage Subsidy (CEWS) - Period 6 (August 2 to August 29, 2020) filing deadline is FEBRUARY 25th. Each period is due 180 days after the end of the period. CRA provides guidance through its CRA FAQ (https://www.canada.ca/en/revenue-agency/services/subsidy/emergency-wage-subsidy/cews-frequently-asked-questions.html) and to estimate how much you may eligible for you can use the calculator here: https://www.wagesubsidycalculator.ca.
T4 Slips - Note that T4s are required to report the amounts paid in specific periods that correspond to CERB periods. This is adding significant time to each T4 Slip prepared this year. You will note Boxes 57, 58, 59 and 60 on T4 Slips. This is being used by CRA to audit CERB, CEWS and TWS claims.
PD27 - If you claimed CEWS or 10% Temporary Wage Subsidy (TWS), the form PD27 is required to be filed to identify the amount of the TWS you received, even if none was claimed. This is also adding to the time required for T4 slips this year, but there does not appear to be a late filing penalty.
CEBA - This was increased to $60,000 with $20,000 being forgivable, but before you apply ensure you review the bank agreement closely to ensure you qualify. See our article here for our caution on this expansion - https://www.smllp.ca/blog/careful-ceba-expansion. If you are eligible you can read more about it here: https://ceba-cuec.ca
Canada Emergency Rent Subsidy (CERS) - This program provides subsidies to help cover rent for those who have had a revenue drop - ensure you read the criteria here - https://www.canada.ca/en/revenue-agency/services/subsidy/emergency-rent-subsidy.html. Note that the filings are required within 180 days of the end of the period. The first deadline, for period September 27 to October 24, 2020 is April 22, 2021.
PROVINCIAL PROGRAMS OF NOTE
Small and Medium-Sized Business Recovery Grant - The Small and Medium Enterprise Relaunch Grant offers up to $20,000 in funding for eligible small- and medium-sized businesses, cooperatives and non-profits to offset a portion of their relaunch costs. https://www.alberta.ca/sme-relaunch-grant.aspx
Critical Workers Benefit - Get $1,200 for serving on the frontlines during the pandemic. Eligible Albertans include health, social services, core retail and supply chain workers. https://www.alberta.ca/critical-worker-benefit.aspx
BC Recovery Benefit is a one-time tax free payment of up to $1,000 for families ($500 for individuals). Family 2019 taxable income must be below $175,000 and individuals must have 2019 taxable income below $87,500. You can apply through the BC website here - https://www2.gov.bc.ca/gov/content/economic-recovery/recovery-benefit
Launch Online is a grant program of up to $7,500 to help a BC business to start up an e-commerce or online shop. https://launchonline.ca
B.C. Increased Employment Incentive offers a refundable tax credit for all private sector B.C. employers to encourage the creation of new jobs for B.C. workers or increased payroll for existing low or medium-income employees. Applications open in March 2021.
B.C. PST Rebate on Select Machinery and Equipment: Through the B.C. PST Rebate on Select Machinery and Equipment, corporations can apply to receive an amount equal to the PST they paid between September 17, 2020 and September 30, 2021 on qualifying machinery and equipment. Applications open online starting April 1, 2021
ALSO NOTE FOR BC ...
BC Land Transparency Act- Corporations, trustees and partnerships that own land in B.C. will be required to disclose individuals with a beneficial interest in the land. This requirement will also apply to pre-existing owners. The Land Owner Transparency Registry will launch on November 30, 2020 to begin collecting information. The ability to search the registry will be launched on April 30, 2021. Pre-existing owners who are required to file a transparency report will have until November 30, 2021 to file. Please contact your lawyer for more information.
BC Corporate Transparency Act - As part of government’s commitment to end "hidden" ownership of companies in British Columbia and to help crack down on illegal activities the Business Corporations Act requires B.C. private companies to create and maintain a transparency register listing the significant individuals of the company. Please contact your lawyer for more information.
One-time Main Street Recovery grants and rebates of up to $1,000 are available for eligible businesses to recover the costs of personal protective equipment (PPE), property tax and energy bills.
Ontario Small Business Support Grant - Starting at $10,000 for all eligible businesses, the grant provides businesses with funding to a maximum of $20,000 to help cover decreased revenue expected as a result of the Province wide Shutdown.
Ontario permanently increased the Employer Health Tax (EHT) exemption from $490,000 to $1 million. Along with doubling the exemption, Ontario doubled the instalment threshold from $600,000 to $1.2 million starting with the 2021 tax year.
Read more - https://www.ontario.ca/page/businesses-get-help-covid-19-costs