UPDATE COVID-19 Small Business FAQs COVID-19 Small Business FAQs Coronavirus

UPDATE 3/25/2020! COVID-19 Small Business FAQs

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⭐UPDATE 3/25/2020⭐

NEW EMERGENCY RESPONSE BENEFIT!

First and foremost we hope you are staying safe in your homes and if you are working in an essential industry, we appreciate you! Below you can find a quick synopsis of answers to the most common questions and items we’ve recently been asked about. These answer the questions of “I’m self-employed and had to shut down my business, what applies to me since I can’t apply for EI?” and “How does this impact my payroll regarding the Payroll Subsidy they announced?” and more.


NEW! EMERGENCY RESPONSE BENEFIT!

  • Replaces the Emergency Support Benefit & Emergency Care Benefit previously announced
  • Is said to be $2,000 per month for 4 months
  • Hopeful to be up and running by April 6th, with cheques hopefully being provided within days after that
  • Eligibility TBD, STILL DEVELOPING...

BUSINESS OWNERS with questions about NON-ESSENTIAL closures can call NEW Ontario hotline at 1-888-444-3650 


DEADLINES

In order to provide greater flexibility to Canadians who may be experiencing hardships during the COVID-19 outbreak, the Canada Revenue Agency will defer the filing due date for the 2019 tax returns of individuals, including certain trusts.

  • For individuals (other than trusts), the return filing due date will be deferred until June 1, 2020.  However, the Agency encourages individuals who expect to receive benefits under the GSTC or the Canada Child Benefit not to delay the filing of their return to ensure their entitlements for the 2020-21 benefit year are properly determined.
  • For trusts having a taxation year ending on December 31, 2019, the return filing due date will be deferred until May 1, 2020.

The Canada Revenue Agency will allow all taxpayers to defer, until after August 31, 2020, the payment of any income tax amounts that become owing on or after March 18, 2020 and before September 2020. This relief would apply to tax balances due, as well as installments, under Part I of the Income Tax Act. No interest or penalties will accumulate on these amounts during this period.

*There has been no announcement pertaining to HST/Payroll Remittance filing extensions nor payment deferrals at this time


EMERGENCY SUPPORT BENEFIT 

ELIMINATED! REPLACED BY EMERGENCY RESPONSE BENEFIT - 3/25/2020


EMERGENCY CARE BENEFIT 

ELIMINATED! REPLACED BY EMERGENCY RESPONSE BENEFIT - 3/25/2020


10% PAYROLL SUBSIDY (Effective 3/18/2020)

Temporary Wage Subsidy - Manual Calculation and Journal Entry

  1. The government is proposing to provide eligible small employers a temporary wage subsidy for a period of 3 months (Mar 18 to June 18?, June 30? - TBD)
  2. The subsidy will be equal to 10% of remuneration (earnings) paid during that period up to a maximum subsidy of $1,375 per employee and $25,000 per employer (this will require tracking –download a quick template to track this HERE)
  3. Employers will be able to benefit immediately (need to confirm date), by reducing their remittances (tax liability) of income tax withheld on their employees’ remuneration (earnings)
  4. Have been advised this is a reduction of Income tax payments and not CPP or EI. As a result, there should be no trigger for PIER reviews next year
  5. The subsidy benefit is purely for the Employer, to hang onto extra cash flow
  6. Therefore the employees Pay Cheque and Net Pay are unaffected by this change. They are still required to pay their fair share of Income Tax, CPP and EI. As such, the employer will still be required to match the CPP and EI accordingly
  7. Those eligible will include:
    Corporations eligible for the Small business deduction
    Non-profit organizations
    Charities
  8. Those not eligible:
    Sole proprietors
    Partnerships
    Corporations not eligible for Small business deduction
  9. From how the language is written, the math could look something like this:
  • Employee view example:
    • Employee Gross Wages $1,000
    • Income Tax (300)
    • CPP (30)
    • EI (20)
    • Net Pay $650
  • Employer tax responsibility:
    • Income Taxes $300
    • CPP - match 30
    • EI - match 1.4x 28
  • Tax liability $358
    • Less subsidy (10% x $1K earnings) (100)
  • Adjusted Tax liability $258
    • Given this tax break to the employer, the entry required would be:
    • Debit - Tax liability $100
    • Credit - Other Income $100

IT HAS BEEN CONFIRMED THAT THIS SUBSIDY WILL BE TAXABLE INCOME FOR THE BUSINESS, SO DO CLASSIFY IT AS INCOME.


IMPORTANT LINKS

https://www.canada.ca/en/revenue-agency/campaigns/covid-19-update.html

https://www.canada.ca/en/department-finance/economic-response-plan.html


BUSINESS FINANCING

https://www.bdc.ca/en/pages/special-support.aspx

https://www.canada.ca/en/department-finance/programs/financial-sector-policy/business-credit-availability-program.html


Plenty more details and changes to follow but please feel free to book a call or virtual meeting with us if you have any tax questions.

Talk soon and stay safe.

Regards,
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