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So far, there have been over 1,500,000 CEWS claims submitted, providing thousands of businesses with much-needed funding to help them keep their doors open. However, there are many tax considerations and reporting claims to be aware of.  For one, the CEWS is deemed to be received at the end of the qualifying period to which it relates.

Don’t worry, we’ll break it down for you right now:

If the period of the claim ended June 6, 2020, and the year-end of the corporation is June 30, 2020, then the CEWS claim for that period should be included in income, even if it isn’t received until the following period.

The next period end for the CEWS would be July 4, 2020, so that period would not be reported as income in the June 30, 2020 year-end.  If you posted an accrual for accounting for some of the CEWS that will be received on July 4, 2020, claim the amount of the accrual should be deducted from income on Schedule 1 and included in income in the following taxation year.

This is the opposite of how CRA treats most credits that are taxed when received.  However, subsection 125.7(3) of the Income Tax Act states that the CEWS benefit calculated is deemed to be government assistance that is received immediately before the end of the qualifying period to which it relates.  If a CEWS claim is adjusted and the year-end has already been filed that an amendment to the tax return should be filed to ensure the correct income is being reported.

This could be another area where CRA completes an audit to ensure that income is being reported in the proper periods.  Not reporting the income could result in penalties and interest.

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