How COVID-19 Affects Your Business Taxes and What Relief is Available?
COVID-19 has changed the way many businesses interact with their customers. This includes adjustments for countless Canadian employees who continue to navigate through reduced wages, occupancy, hours and challenging layoffs. If your business applied for government relief programs to support your staff during the pandemic, you need to ensure those benefits are accurately claimed and reported in the appropriate tax year.
Contact your accountant or connect with McNabb Lucuk LLP by phone at 780-539-3400, or email [email protected] or [email protected] if you have any questions on relief program calculations, applications or reporting.
Canada Emergency Wage Subsidy (CEWS)
The Canadian Emergency Wage Subsidy (CEWS) program opened in late April 2020 to offer relief to businesses suffering a decline in revenue compared to the same period in 2019 or January and February of 2020. The CEWS continues to remain available in four week blocks scheduled until the end date of June 2021.
Under the Income Tax Act (the Act), the CEWS benefit is considered received and taxable to the recipient on the last day of the corresponding qualifying period. December 19, 2020 marks the final qualifying period in 2020. Businesses with a year-end of December 31 must accrue and report CEWS benefits claimed in all qualifying periods up to, and including, December 19 as taxable income even if the benefit was not received until 2021. Similar to the Canada Emergency Rent Subsidy, the benefit can be claimed up to 180 days after the qualifying period ends and filings may need to be amended to include the benefit in the appropriate taxation year.
Temporary Wage Subsidy (TWS)
The Temporary Wage Subsidy (TWS) was made available to businesses from March 18, 2020 to June 19, 2020. The benefit was claimed by calculating the subsidy amount, up to $1,375 for each employee, and reducing income tax payroll remittances by that value.
The benefit of the TWS, up to a maximum of $25,000 for each eligible employer, is considered taxable income in the period in which the source deductions were reduced. However, the CRA has permitted taxpayers to apply for the TWS by reducing any payroll remittances in 2020. Business taxpayers should report the total subsidy amount as income on their tax return in the same year that remittances were reduced.
If your business under-calculated the TWS during remittance, you can still access the benefit amount you are entitled to, which may be shown as a refund when filing Form PD27. Please speak with your accountant or contact McNabb Lucuk LLP directly by phone at 780-539-3400, or email [email protected] or [email protected]for any questions on reporting COVID-19 relief programs.